US Budget Deficit Highest in Six Years 10/16 06:15
The federal budget deficit has surged to $779 billion in fiscal 2018, its
highest level in six years as President Donald Trump's tax cuts caused the
government to borrow more heavily in order to cover its spending.
WASHINGTON (AP) -- The federal budget deficit has surged to $779 billion in
fiscal 2018, its highest level in six years as President Donald Trump's tax
cuts caused the government to borrow more heavily in order to cover its
The Treasury Department said Monday that the deficit climbed $113 billion
from fiscal 2017. Debt will likely worsen in the coming years with the Trump
administration expecting the deficit to top $1 trillion in 2019, nearly
matching the $1.1 trillion imbalance from 2012.
The deficit worsened because tax revenues are not keeping pace with
government spending. The government's fiscal year runs from October to
September, unlike calendar years that begin in January. Tax revenues were
essentially flat in fiscal 2018, while spending increased 3.2 percent as
Congress gave more funds for military and domestic programs.
Revenues generally tumbled after December when Trump signed into law $1.5
trillion of tax cuts over the next decade. The tax cuts have caused economic
growth to accelerate this year with Federal Reserve officials anticipating
gains of 3.1 percent. But the Trump administration initially promised that the
tax cuts would pay for themselves through stronger growth --- and there is no
sign so far of that happening.
"The budget numbers make very clear that the faster growth isn't stopping
the deficit from increasing," said Marc Goldwein, senior policy director for
the Committee for a Responsible Federal Budget, a group that advocates for
Treasury Secretary Steve Mnuchin suggested in a statement that the
underlying source of the widening deficit was growth in government spending,
rather than the tax cuts.
"Going forward the President's economic policies that have stimulated strong
economic growth, combined with proposals to cut wasteful spending, will lead
America toward a sustainable financial path," Mnuchin said.
But William Gale, a senior fellow at the Brookings Institution, noted that
the tax cuts are unlikely to generate a long-term bump in economic growth. More
importantly, most estimates suggest that the deficit will worsen as spending on
Social Security, Medicare and other programs increase with the aging baby
Gale said it's generally better to reduce the deficit when the economy has
improved, which can minimize the sting of any changes to spending and prevent
steeper cuts to spending in the future.
The cost of financing the deficit have increased following Trump's tax cuts,
with the interest charged on the 10-year U.S. Treasury note rising to roughly
3.15 percent from 2.46 percent at the start of the calendar year.
"By cutting taxes in 2017 when the economy was already quite strong,
Congress and the administration not only missed a golden opportunity to begin
to address the fiscal problem, they actually made the problem worse," he said.
The Trump administration in July sharply revised higher its deficit
estimates for coming years when it released its mid-session budget review.
It projected the 2019 deficit will hit $1.09 trillion and will total $1.08
trillion in 2020 and $1.01 trillion in 2021 before once again dipping slightly
below the $1 trillion mark in 2021 with a projected deficit of $952 billion.
The only other period when the federal government has run deficits above $1
trillion was for four years from 2009 through 2011. That's when the Obama
administration was using tax cuts and increased spending, along with support
for the banking system, to combat the 2008 financial crisis and Great
Recession, the worst economic downturn since the Great Depression of the 1930s.