My husband and I do a monthly kitchen table review of every bill, every credit card statement, every weird little subscription that slipped through. We’re not good at math. I need a spreadsheet just to feel safe about a $63 grocery run.
So when the federal government’s own books show a $2.1 trillion deficit for fiscal 2026 — about $200 billion higher than forecast just in February — I had to stop and figure out what actually happened.
It’s not spending. It’s one income stream that suddenly turned into a bill: tariffs.
What the CBO is actually saying
The Congressional Budget Office said in its latest Monthly Budget Review that the federal deficit for fiscal 2026 is projected to hit $2.1 trillion. In February, that number was $1.9 trillion. The gap between those two forecasts is roughly $200 billion.
Here’s the part that matters: CBO says federal spending is running pretty close to its earlier baseline. The damage came from the revenue side. Tariff and customs-duty collections came in about $250 billion below what CBO projected back in February.
Other income helped cushion the blow. Income and payroll tax receipts are running about $75 billion above the February baseline. But other revenue sources are about $25 billion below expectations. Do the math, and you get a net revenue gap of roughly $200 billion — which is exactly why the deficit jumped by that amount.
Why did tariff collections collapse?
On Feb. 20, the Supreme Court ruled that the administration didn’t have authority under the International Emergency Economic Powers Act (IEEPA) to impose those broad tariffs. The government moved quickly to replace them under other legal authorities.
But the replacements aren’t expected to fully recover the revenue everyone was counting on. CBO expects the replacement tariff regime to recover “a substantial share” of the lost revenue — not all of it. Some rates have also been lowered, including exemptions for things like Moroccan fertilizer and certain farm equipment.
The refunds are the part most people miss
Tariffs were always supposed to be money coming in. Now they’re money going back out.
Net customs collections were running ahead of last year’s levels through April. Then in May, refunds started flowing. By July, the government was returning more money than it was collecting. Treasury data shows about $33.4 billion in tariff refunds that month, against roughly $24.8 billion in tariff revenue. CBO’s accounting puts the July refund figure a bit higher, at about $36 billion against $26 billion in gross collections. Either way, the trend is the same.
In total, the government has now returned more than $100 billion to businesses that paid duties under the invalidated IEEPA regime. Refunds totaled nearly $22 billion in May, about $49.1 billion in June, and accelerated again in July. A refund portal opened in late April, and roughly $166 billion in duties — plus interest — could still be eligible. So more of this is coming, not going away.
What’s happening with the debt
All of this is landing on top of a year of heavy borrowing.
“We’ve borrowed an astounding $1.8 trillion this fiscal year, with $431 billion in the month of July alone, equating to nearly $6 billion per day,” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget. “We’re on track to surpass $2 trillion in borrowing this fiscal year despite not being in a recession. That is not normal.”
July alone produced a deficit of about $431 billion, roughly $140 billion higher than July of the previous year. And the country is approaching a $40 trillion gross national debt.
On the spending side, the big programs keep climbing: Social Security outlays are up $70 billion (5%), Medicare is up $66 billion (8%), and Medicaid is up $45 billion (8%) for the fiscal year to date. Net interest on the debt increased $117 billion, or 14%.
What this means for your household budget
This isn’t a personal financial planning article, and none of it is professional financial advice. But the pattern is the same one I watch for in my own budget: an income stream you quietly started relying on can vanish faster than you built it, and the hole it leaves takes a while to close.
For the government, tariffs were supposed to be the cushion. For most of us, the cushion is an emergency fund and a budget that can absorb a surprise. If the news has you worried, the same discipline works at the kitchen table: know your numbers, keep a buffer, and don’t count on any one income stream.
One thing to do today: check your own version of a “tariff” — an income or discount you’ve been quietly counting on — and ask yourself what happens if it disappears next month.