Annual US budget deficit hits $779 bn, highest since 2012: US Treasury

Clay Curtis
October 17, 2018

The federal government usually increases spending - and deficits - to boost a faltering economy - such as during the 2008 recession triggered by the subprime mortgage and banking crisis.

The deficit is growing even as the government collected a record level of income tax this year.

The deficit jumped 17 percent (or by $113 billion) to $779 billion at the end of Trump's first fiscal year, according to final figures released Monday by the Treasury Department.

The US budget deficit hit United States dollars 779 billion in the fiscal year ending September 30, the highest since 2012 and USD 113 billion more than in the prior year, the Treasury announced on Monday.

The approximately 17 percent jump in the federal deficit came despite the strong growth in the overall US economy, an unusual instance in which the economy and the deficit are expanding at the same time. Debt will likely worsen in the coming years with the Trump administration expecting the deficit to top $1 trillion in 2019, almost matching the $1.1 trillion imbalance from 2012.

But the Congressional Budget Office, a nonpartisan arm of Congress, forecasts government spending will outweigh revenue by $973 billion in fiscal 2019 and more than $1 trillion the next year.

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But Republicans, who have historically decried fiscal irresponsibility, only want to talk about spending. Sanders' office produced an analysis arguing America would be running a surplus without the tax cuts passed under Trump and George W. Bush, higher military spending after September 11, 2001, and the costs of the wars in Iraq and Afghanistan. In 2017, the federal deficit was equal to 3.5 percent of gross domestic product (GDP), but grew to 3.9 percent of GDP in 2018.

"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.

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. That increases the government's ability to spend while reducing the demand for social services. At the time, the administration had projected that the budget deficit would hit $890 billion.

Why are budget deficits rising?

Tax revenues were flat during 2018 and corporate tax collections fell by $76 billion, Treasury reported.

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