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News / Economy

US budget deficit hits $779 billion, highest since 2012

Wednesday, 17 October 2018 5:36 PM [ Last Update: Wednesday, 17 October 2018 5:51 PM ]

In this file photo taken on January 24, 2017 a man enters the US Treasury Department building in Washington, DC. (AFP photo)

The US government’s budget deficit has surged to $779 billion in fiscal 2018, its highest level in six years as President Donald Trump’s tax cuts caused the government to borrow more heavily in order to cover its spending.

This year’s deficit was $113 billion more than the 2017 fiscal year and equivalent to 3.9 percent of GDP, the US Treasury Department announced on Monday.

Revenues generally tumbled after December when Trump signed into law $1.5 trillion of tax cuts over the next decade. The law was passed by the Republican-controlled US Congress.

Economists generally view the corporate and individual tax cuts passed as likely to expand the nation’s deficit. But Trump and his fellow Republicans have touted the tax cuts as a boost to growth and jobs.

The Bipartisan Policy Center, a Washington, DC–based think tank, called the report “a wake up call” for policymakers to resolve the budget crisis.

“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, the think tank’s senior vice president, said of next month’s US congressional elections.

PressTV-Trump's $4.4 trillion budget sharply raises deficit

The US president has unveiled a $4.4 trillion budget for next year that will add more than $1 trillion to the federal deficit.

Much of the widening deficit is due to slower growth in tax revenues because of the tax cuts and higher military spending. Tax revenues were essentially flat in fiscal 2018, while spending increased 3.2 percent as Congress gave more funds for military and domestic programs.

Some officials in the Federal Reserve, the nation’s central bank, have warned that rising US deficits could hamper any fiscal response by the government to an economic downturn.

“The budget numbers make very clear that the faster growth isn’t stopping the deficit from increasing,” said Marc Goldwein, senior policy director for the Committee for a Responsible Federal Budget, a group that advocates for lower deficits.

Most estimates suggest that the deficit will worsen as spending on Social Security, Medicare and other programs increase with the aging baby boomer population.

US Senate Majority Leader Mitch McConnell suggested on Tuesday that Congress should target Social Security and Medicare for cuts to address the growing federal debt.

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