Federal budget through June shows deficits, interest costs rising

The Congressional Budget Office gave an update on what the US budget looked like through June. And on the revenue side, there was less than what we had in June 2025. But it was for a one-time payback of an earlier move that boosted revenues.

CBO estimates that receipts in June 2026 totaled $495 billion—$32 billion (or 6 percent) less than the amount recorded last June. That decrease was driven by a sharp decline in net collections of customs duties because of tariff refunds required by the Supreme Court’s February ruling. In June 2026, refunds of customs duties ($50 billion) exceeded gross collections ($24 billion), producing a net outflow of $26 billion—$52 billion below the $27 billion collected last June.

As you will see, tariff revenue has turned negative in the last 2 months, on the heels of a Supreme Court ruling in February that the Trump Administration illegally imposed some duties. This led to a total of $50 billion in refunds being sent to US businesses and individuals in June following $20 billion in refunds for May.

Take away the tariff refunds, and tax revenues were up year-over-year.

Collections of income and payroll taxes rose by $18 billion (or 4 percent), reflecting higher wages and salaries and partially offsetting the decrease in customs duties. (The Treasury reallocated $13 billion from payroll taxes to individual income taxes in June to account for newly available tax information from prior years. That reallocation does not affect the combined increase for the two sources.) In addition, corporate income taxes rose by $2 billion (or 3 percent).

But let's not think that Trump Tax Scam 2.0 is paying for itself with economic growth, because most of the tax benefits came with this year's refunds this Spring. That's especially for corporations, who are paying much less in taxes in Fiscal Year 2026.

Receipts from corporate income taxes [have] decreased by $86 billion (or 24 percent) [compared to Fiscal Year 2025 through June]. The enactment of the 2025 reconciliation act allowed corporations to take larger deductions for certain investments, thereby reducing some payments and offsetting the increases in those receipts that otherwise would have been expected, given the rise in corporate income.

On the spending side, Social Security, Medicare and Medicaid is accounting for 46.2% of overall Federal spending, at $2.55 billion of the $5.52 billion spent so far in Fiscal Year 2026.

Those 3 programs account for $169 billion of the $178 billion in increased spending for FY 2026, which also means that the rest of federal spending hasn't gone up at all for those 9 months.

A big reason that other government spending hasn’t gone up with 2026’s inflation is due to a reduction in the amount of student loans that came from Tax Scam 2.0.

Outlays of the Department of Education decreased by $55 billion (or 55 percent), largely because the department recorded a net reduction of about $53 billion in the estimated costs of outstanding student loans. No annual reestimate of outstanding loans was recorded during the first nine months of fiscal year 2025. In addition, spending from the Education Stabilization Fund declined by $12 billion (or 89 percent). The total decline in education spending would have been larger if not for $11 billion in outlays stemming from the recording of the estimated costs of two administrative actions announced in 2026: one delaying collections on delinquent student loans ($4 billion) and the other providing a discount to borrowers who elect to have automatic monthly payments made from their bank accounts ($7 billion).

And another reason for limited expenditures is related to the Trump Administration picking and choosing which (red) areas get FEMA aid while denying other (blue) areas.

Spending by the Department of Homeland Security decreased by $13 billion (or 15 percent) mainly because the Federal Emergency Management Agency spent more in disaster response during the same period last fiscal year. Increased spending for immigration enforcement and border security this year offset some of that reduction.

At the same time, “on the books” military spending is up $30 billion so far in Fiscal Year 2026, and interest on our national debt is up $98 billion. Don’t expect either to be slowing down any time soon with Trump/GOPs in power.

It's not surprising that budget deficits keep climbing in 2026, but it does seem like the combination of higher prices and rising red ink for Uncle Sam sunk in a bit more in the last week, as interest rates on the benchmark 10-year US Treasury Bond has had a noticeable rebound in July.

Doesn't seem like a healthy situation to continue in, and the continued cutbacks in non-defense and non-entitlement spending can't be something that'll help consumer spending as we look at the second half of 2026. The higher interest rates aren't going to help all those AI firms that are strung out on debt, nor will it encourage the venture capital types to keep pumping their hopium dollars into these businesses. But because the economy allegedly keeps growing and job losses aren't rampant, it doesn't feel like an emergency today. Where this breaks and how it changes as a result is where the real interesting stuff will begin.