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

Roman Schwartz
October 19, 2018

The deficit also grew as a share of the economy, rising to 3.9 per cent of GDP, up from 3.5 per cent in the 2017 fiscal year, the report showed, putting it well above the 3.2 per cent average of the last 40 years.

"Going forward, President Trump and this administration will continue to work with Congress to make the hard choices needed to bring fiscal restraint, which, when matched with increasing revenue, will reduce our deficit", he said.

That sent the deficit up 17 per cent or US$113 billion, to its highest level since 2012, according to the Treasury report.

Republican tax cuts, increased federal spending and an aging population have contributed to the fiscal strains, though the GOP says tax reform enacted this year will spur economic growth and lift government revenue.

The Trump administration in July sharply revised higher its deficit estimates for coming years when it released its mid-session budget review.

Total government borrowing increased by USD 1 trillion in the latest fiscal year to USD 15.75 trillion, including USD 779 billion to finance the deficit. In 2013, the deficit dropped back down to $680 billion.

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The only other period when the federal government has run deficits above US$1 trillion was for four years from 2009 through 2011. In March, Trump signed a $1.3 trillion spending bill into law.

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 tax cuts have helped cause economic growth to accelerate this year with Federal Reserve officials anticipating gains of 3.1 percent.

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

The deficit worsened because tax revenues are not keeping pace with government spending, which has boosted the long-term debt figure to more than $21 trillion. "The fact that our government is closing in on trillion-dollar deficits in the midst of an economic expansion should be a serious issue for voters and candidates", William Hoagland, its senior vice president, said of next month's USA congressional elections.

He said that while a good economy would increase government revenue, "this fiscal picture is a blunt warning to Congress of the dire consequences of irresponsible and unnecessary spending".

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