US Budget Deficit Hits Six-Year High

U.S. Government Deficit Grew 17% in Fiscal 2018

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

Secretary of the Treasury Steve Mnuchin announced the shortfall Monday, but said that because of a combination of factors, the Treasury Department had predicted a budget deficit $70 billion higher.

The federal budget deficit has surged as US President Donald Trump's tax cuts caused the government to borrow more heavily in order to cover its spending.

The only other period when the federal government has run deficits above US$1 trillion was for four years from 2009 through 2011.

This week, the U.S. Treasury Department released the nation's monthly bank statement, revealing a deficit of $779 billion - a six-year high and a almost 17 percent increase year-over-year from $666 billion in 2017.

The figure is $113 billion more than it was a year ago.

Reuters reports that, as the government closes out fiscal year 2017, a spending spree has driven it further into the red, though the deficit may not last for long.

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Why are budget deficits rising?

"This year's deficit amounts to US$6,200 per household and is more than we spend each year on Medicare or defence", Maya MacGuineas, the committee's president, said in a statement. Tax revenues were essentially flat in fiscal 2018, while spending increased 3.2 percent as Congress gave more funds for military and domestic programs. In March, Trump signed a $1.3 trillion spending bill into law.

The Trump administration in July sharply revised higher its deficit estimates for coming years when it released its mid-session budget review. Borrowing has increased over the past year, partially to make up for slower growth in tax revenues because of the tax cuts, while military spending has also risen.

Corporate tax collections in the USA fell 22 percent, or $76 billion, in the fiscal year, which ended September 30.

"We'd be comparing temporary upkicks in the economy that get revenues up - if it happens - with permanent changes in spending and taxes that will bring the deficit up", he noted.

The OMB director went on to assert "America's booming economy" will lead to an increase in government revenue looking forward. "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 US congressional elections.

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