US budget deficit hits $779bn in Trump’s first full fiscal year
New OMB data show $113bn increase after tax cuts and spending measures
The US budget deficit widened to a six-year high of $779bn during Donald Trump’s first full fiscal year in the White House as borrowing swelled despite surging economic growth.
The deficit grew by $113bn from the previous year, reaching 3.9 per cent of US gross domestic product in the fiscal year ended September 30. That compared with 3.5 per cent the previous year and was above the 40-year average of 3.2 per cent, according to a report from the US Treasury and Office of Management and Budget.
The figures will intensify concerns about the vast deficits the US government is running during an economic boom that has driven unemployment to its lowest levels since the late 1960s. Tax reductions pushed through at the end of 2017, coupled with higher public spending agreed by Congress early this year, are set to push up public debt at a rapid pace, triggering concerns that there will be less room for fiscal stimulus when the US next enters a downturn.
The Congressional Budget Office has predicted that under current laws, public debt is on course to reach its highest levels relative to GDP in US history over the coming 30 years. Yet months before his election, Mr Trump claimed that he would pay off the US national debt in eight years, while his fellow Republicans ran on platforms of fiscal restraint in 2016.
“We have a structural budget deficit that is largely driven by our unwillingness to increase federal revenue to satisfy the public’s appetite for spending programs,” said Michael Strain of the conservative American Enterprise Institute. “Over the next 30 years the debt is supposed to grow and grow and grow, and that is largely driven by predictable increases in social security spending, and major health programmes including Medicare.”
Receipts grew by 0.4 per cent compared with the previous fiscal year, while spending was up 3.2 per cent, the report showed. Mick Mulvaney, the director of the OMB, said the deficit was being exacerbated by a “continual unwillingness” on the part of Congress to restrain spending.
“The president is very much aware of the realities presented by our national debt,” he said in a statement. “America’s booming economy will create increased government revenues — an important step toward long-term fiscal sustainability. But this fiscal picture is a blunt warning to Congress of the dire consequences of irresponsible and unnecessary spending.”
Maya MacGuineas, president of the Committee for a Responsible Federal Budget, said that the recent tax cuts and spending increases were “making a bad problem even worse.”
“Deficits are rising — and fast,” she added. “In as soon as a year, they will top $1tn and never come back down unless Congress acts.”