The federal government’s fiscal year ended on September 30, which probably passed without much celebration at your house. After all the talk about cutting waste and putting the government’s finances in order, Washington closed FY2026 with a larger deficit than the year before. Taxpayers might reasonably ask when that fiscal discipline is scheduled to arrive.
The problem, of course, did not start with this administration or the 119th Congress. Presidents and lawmakers from both parties spent decades making commitments without collecting enough revenue to cover them, while an aging population and growing benefit costs have added up. But the people currently in charge knew all that when they took office.
Now that we have largely closed the books on FY2026, let’s take a stroll down memory lane. Any look back starts with the One Big Beautiful Bill Act, a law that singlehandedly added trillions to projected deficits. Enacted shortly before the fiscal year began, OBBBA combined sweeping tax cuts and additional spending on defense and homeland security with spending cuts that barely made a dent. The White House was effusive. In June 2025, it labeled the claim that the bill would increase deficits a “myth” and said the legislation would reduce them by more than $2 trillion through economic growth and spending cuts.
The year-end numbers offer little cause for celebration. According to the Congressional Budget Office’s preliminary estimates, the government spent roughly $2 trillion more than it collected in FY2026, a deficit $218 billion larger than the previous year’s. Corporate income tax receipts fell 16 percent, with CBO explaining that OBBBA’s larger deductions for certain investments reduced payments even as corporate income rose. Net interest payments on the debt reached about $1.14 trillion. Even tariff receipts fell, thanks to a rather expensive refund problem for earlier tariffs deemed illegal.
The administration had presented its whopping new tariffs as a revenue bonanza and an economic advantage. But tariffs are taxes on imports, putting upward pressure on prices. Then, in February, the Supreme Court ruled that the administration lacked authority to impose its sweeping emergency tariffs. Revenue plans work better when the government is legally entitled to collect the revenue. CBO estimates that the government returned about $130 billion in emergency tariff collections during FY2026. Keep in mind, those refunds went to importers that paid the duties, not households that paid higher prices.
Energy policy supplied another expensive surprise. While arguing that Americans should stop supporting offshore wind, the administration pushed developers into roughly $4 billion in settlements to abandon planned wind projects as demand for electricity is spiking thanks to massive AI data center buildout. These companies had paid the government for their leases. Now the government is paying them to walk away and hopefully invest that money in other projects, mostly oil and gas. Getting taxpayers out of the wind business apparently required a substantial taxpayer check. Unfortunately, a change in the administration’s energy preferences is not, by itself, a return on investment.
Then there was the cost of another war. In his inaugural address, President Trump said success would be measured partly by “the wars we never get into.” By August 1, CBO estimated, the conflict with Iran had cost the Defense Department approximately $38 billion. CBO had difficulty compiling the estimate because, in an unprecedented move, the Pentagon wouldn’t share the data. So $38 billion is not a final bill or even a full fiscal-year total. That estimate also leaves out long-term costs such as veterans’ health care and disability benefits, which taxpayers will be paying long after the fighting ends. Whatever the administration’s changing case for the conflict, one thing we know for sure is that it’s not cheap.
Meanwhile, the administration’s marquee spending cleanup had some problems of its own. In August, the Government Accountability Office (GAO) found that some savings reported on DOGE’s “Wall of Receipts” were incorrect or lacked supporting evidence. One example involved $1.7 billion in claimed savings on a defense health IT contract that was never terminated or reduced. Huh. Keeping receipts is usually a good habit, whether on a wall or otherwise. But they only help if they describe something that actually happened.
Another not-so-great cost-saving idea was to cut funding for the Internal Revenue Service. Because who doesn’t hate the tax man, right? Alas, CBO has found that reductions in enforcement funding costs more in lost tax collections than they save in spending. The IRS had already abandoned examinations of hundreds of large partnerships with discrepancies in their returns because it lacked the time and resources to pursue them. Cutting enforcement is good news for people who can afford a team of aggressive tax lawyers. For taxpayers whose taxes come straight out of their paychecks, it means more borrowing and a bigger interest bill.
The fiscal year ended with another fight over claimed savings. Days before September 30, the administration moved to cancel $810 million Congress had approved, using a maneuver known as a pocket rescission. With Congress in recess, the White House withheld money as its expiration date approached, to run out the clock rather than getting congressional approval to cancel spending already signed into law. GAO’s position is straightforward. Pocket rescissions are illegal. The fiscal calendar is not a presidential line-item veto.
Washington cannot claim fiscal discipline by pointing to selected cuts while ignoring the much larger cost of its own decisions. The fiscal year is over. Taxpayers will be paying for these decisions for years to come.
