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

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

The U.S. government closed the 2018 fiscal year $779 billion in the red, its highest deficit in six years, as Republican-led tax cuts pinched revenues and expenses rose on a growing national debt, according to data released on Monday by the Treasury Department.

With the calendar adjustments, the trade surplus in September was $59 billion compared with a $56 billion surplus the year earlier, the Treasury official said.

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.

Economists generally view the corporate and individual tax cuts passed by the Republican-controlled U.S. Congress late previous year and an increase in government spending agreed in early February as likely to balloon the nation's deficit.

But the Trump administration initially promised that the tax cuts would pay for themselves through stronger growth - and there was no sign so far of that happening. Trump frequently criticized his Democratic predecessor Barack Obama for running up the deficit, and in 2012 recommended banning lawmakers from reelection if Congress couldn't balance the budget. Debt would likely worsen in the coming years with the Trump administration expecting the deficit to top US$1 trillion in 2019, almost matching the US$1.1 trillion imbalance from 2012.

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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.

Driven by old-age entitlements and surfing on a wave of retiring boomers, the federal government will continue to pile on more debt unless serious structural reforms are undertaken.

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. The CBO said that this deficit increase "would arise because spending would grow steadily under current law, and revenues would not keep pace with that spending growth". Borrowing has increased over the a year ago, partially to make up for slower growth in tax revenues due to the tax cuts.

The White House blueprint issued in February for the 2019 fiscal year also abandoned the long-held Republican goal of balancing the budget within a decade, instead projecting deficits into the foreseeable future.

However, despite the strong economy, federal revenue only rose by $14 billion. And the administration sharply increased military spending in the past year. That increases the government's ability to spend while reducing the demand for social services.

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