US budget deficit soars to almost $1tn
WASHINGTON: America’s budget deficit soared to nearly $1 trillion in the 2019 fiscal year as government borrowing swelled, the US Treasury announced Friday. The fourth straight year of broadening budget gaps underscored a new tolerance for yawning fiscal imbalances in the current political era. Republican lawmakers’ oftstated fears of weak fiscal discipline under the prior administration have fallen by the wayside and trillion-dollar annual deficits look set to become a new normal. It is the first time since the early 1980s that the budget gap has widened over four consecutive years.
The figures reflect the second full budget year under US President Donald Trump, a Republican, and come at a time when the country has an expanding tax base with moderate economic growth and an unemployment rate currently near a 50-year low.
The US budget deficit widened to $984 billion, which was 4.6 percent of the nation’s gross domestic product. The previous fiscal year deficit was $779 billion, with a deficit-to-GDP-ratio of 3.8 percent. Total receipts increased by 4 percent to $3.5 trillion but outlays rose by 8.2 percent to $4.4 trillion.
“Americans from all walks of life are flourishing again thanks to pro-growth policies enacted by this administration,” Acting Office of Management and Budget Director Russ Vought said in a statement accompanying the figures.
The deficit reached a peak of $1.4 trillion in 2009 as the Obama administration and Congress took emergency measures to shore up the nation’s banking system during the global financial crisis and provide stimulus to an economy in recession.
The persistent increase in government borrowing also runs counter to President Donald Trump’s campaign pledges in 2016 to eliminate or at least significantly reduce America’s $19 trillion debt load.
The fiscal 2019 deficit jumped by 26 percent to $984 billion, the highest since 2012, as spending outstripped tax receipts in the wake of the 2017 Republican-led tax cuts, according to the Treasury. Tariffs imposed in Trump’s multi-front trade confrontations also rose to a record $30 billion in the year ended September 30. “President Trump’s economic agenda is working,” Treasury Secretary Steve Mnuchin said in a statement, calling on lawmakers to cut “wasteful and irresponsible spending.”
The increase in the deficit paled in comparison to those recorded during and after the Great Recession of 2007 to 2009.
More than healthcare
But unlike that era, the current stretched fiscal reality coincides with a record economic expansion now in its 11th year. With the economy growing, the government took in more money from workers, importers and companies, who paid $3.5 trillion in taxes, about four percent more than in 2018.
But spending grew twice as fast, rising 8.2 percent to $4.5 trillion, driven higher by rising interest on existing public debts, defense spending and outlays for social safety net programs like Medicare and Social Security. Borrowing from the public swelled to 79.1 percent of GDP for the year, up from 77.5 percent in the year before.
The 2019 fiscal year’s deficit put Washington on a path to exceed forecasts from the non-partisan Congressional Budget Office, which in February said budget gaps should surpass $1 trillion beginning in 2022. Mnuchin repeatedly argued that the sweeping cuts to corporate and personal income taxes in 2017 would spur economic growth, boosting tax receipts and help the tax cuts pay for themselves.
More recently, however, the White House has emphasized other priorities, with the president saying a stronger military is more important than a balanced budget. The United States has run budget deficits every year since the late 1990s, an era which immediately preceded the 2001 terrorist attacks and the ensuing wars and recessions. While interest rates have remained low in the last decade, the costs of US borrowing are rising. Interest on public debts paid by the Treasury in 2019 rose nearly 10 percent to $572.8 billion.
That handily surpassed the $409.4 billion in federal spending on Medicaid, the health insurance program covering scores of millions of low-income Americans.
The annual budget deficit had been reduced to $585 billion by the end of former President Barack Obama’s second term in 2016 and Republicans in Congress during that time criticized Obama, a Democrat, for not reducing it further.
Since then, the budget deficit has jumped due in part to the Republican’s overhaul of the tax system, which in the short term reduced revenues, and an increase in military spending. By the end of fiscal 2019, corporate tax payments were up 5 percent. Customs duties, which have been boosted by the Trump administration’s levying of tariffs on China and others, were up 70 percent year-on-year to a record high.
For September, the US government recorded an $83 billion surplus, a 31 percent drop from the same month last year. When accounting for calendar adjustments, the surplus last month was $17 billion compared with an adjusted surplus of $51 billion the previous year. For the fiscal year, the adjusted deficit was $1 trillion. Outlays were $291 billion in September, up 30 percent from the same month a year earlier while receipts totaled $374 billion, an increase of 9 percent from the yearago month. — Agencies