The U.S. federal budget deficit reached $432.3 billion in July 2026, the highest monthly total since March 2021 and a 48% increase compared to July 2025 [1, 2, 3]. Federal expenditures hit a record $766 billion in the month, up 22% year-over-year, while revenues declined slightly to $334 billion, down 1% from July 2025 [2].
Part of the spike reflected calendar timing, including $99 billion of accelerated benefit payments because July 1 fell on a nonbusiness day [1, 2, 4, 3]. Adjusting for this timing, the reported deficit would be closer to $333 billion [2, 4].
Medicare spending remained the largest government expense in July. Reports vary with CNBC and other sources citing $174 billion, while Anadolu Agency places it at $192 billion before calendar adjustments. Year-to-date Medicare costs have reached about $955 billion [1, 2, 4, 3]. Interest payments on the national debt also contributed significantly, at roughly $104 billion for July according to some reports, with others estimating $118 billion; fiscal year-to-date interest costs total $1.17 trillion [1, 2, 4, 3].
Tariff refunds ordered by the Supreme Court are further adding to the deficit, costing around $33 billion in July due to ongoing rebates of previously collected levies [1, 2, 4, 3].
Through July 2026, the fiscal year-to-date deficit totaled nearly $1.8 trillion, surpassing the same period in 2025 [1, 2, 3]. Spending for the fiscal year has risen 5% to $6.28 trillion, while receipts are up 3%, reaching $4.49 trillion [2, 4].
In the monetary policy arena, former President Donald Trump has urged the Federal Reserve to lower interest rates to cut the government’s debt servicing costs but has remained silent since Kevin Warsh assumed the Fed chairmanship in May 2026 [1, 3]. Despite soft inflation and payroll data lowering expectations for additional Fed rate hikes, futures markets do not anticipate any rate cuts within the next five years [1, 3].
The U.S. Treasury Department released the July 2026 budget data on August 12 [1, 2, 4, 3].
