The U.S. federal deficit reached an estimated $2 trillion in fiscal 2026, as reported Democratic victories set up divided government with President Donald Trump when a new Congress convenes in January.
The Congressional Budget Office (CBO) put the shortfall $218 billion above fiscal 2025. In Monthly Budget Review: September 2026, the agency estimated receipts increased $169 billion, or 3%, while outlays grew $386 billion, or 6%.
CBO said higher net interest and spending on major benefit programs, defense and education contributed to outlay growth, while decreases in other areas partly offset those increases. Higher collections of individual income and payroll taxes accounted for the revenue gain.
The Associated Press called the Senate for Democrats on Nov. 3 and the House early Nov. 4. Reuters also reported that Democrats had won both chambers. The election adds a political backdrop to fiscal policy’s market implications, which EconoTimes examined during the midterm campaign.
In a Nov. 6 analysis published by Economist Writing Every Day, Zachary Bartsch compared federal finances across party-control arrangements using data going back to 1960. His analysis associated Republican presidents in divided government with lower receipts and larger deficits on average than under unified Democratic government. In his lagged calculations, that configuration did not produce statistically reliable movements in outlays or receipts, although the estimates pointed toward a less favorable budget position.
Bartsch said historical variation was too noisy to support a formal projection for 2027-29, and his analysis does not show that divided government causes deficits to change. He also argued that Federal Reserve policy could limit how fiscal shifts affect interest rates. On Oct. 28, the Federal Open Market Committee (FOMC) maintained its federal funds target range at 3.75% to 4% and said inflation remained elevated. The committee said incoming information would help guide its policy stance. The new Congress is due to convene in January.
