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

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

Deficit balloons to $779 billion in Trump’s second year

Administration officials said the deficit, the highest since 2012, was up due to greater federal spending, including a larger military budget increases.

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. The data show that the deficit is growing faster than the economy as a whole.

The budget deficit has continued to climb in recent years, raising concerns the country's debt load of more than $21.5 trillion will grow out of control. Long-term interest rates have moved up slightly in recent weeks but show no signs that investors expect inflation to rise.

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The $779 billion deficit for fiscal year 2018 was up 17 percent from the $666 billion deficit recorded in fiscal year 2017. And that was before Congress passed tax cuts projected to increase deficits by almost $1.9 trillion over the coming decade, even after accounting for additional economic growth.

The Treasury's official tally was in line with an estimate last week from the CBO, which pegged the deficit at $782 billion.

During the same period, government spending rose $127 billion to $4.108 trillion, the release explained.

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The deficit worsened because tax revenues are not keeping pace with government spending. "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 USA congressional elections. Although it is not clear by how much since the effect of the tax cuts in driving that growth is not known with any certainty. What's more, the deficit itself likely acts as a stimulus to the economy, which means that growth might have been lower and unemployment higher without it.

The government did lay claim to a smaller share of the private sector's income in 2018. Tax revenue dropped from 17.2 percent of the U.S. GDP to 16.5 percent, while overall federal government spending rose by 3 percent.

"By cutting taxes in 2017 when the economy was already quite strong, Congress and the administration not only missed a golden opportunity to begin to address the fiscal problem, they actually made the problem worse", he said. Some Fed officials have warned that rising USA deficits could hamper any US fiscal response to a downturn.

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A smaller deficit requires the government to finance a larger fraction of its spending through taxes, which means the government collects the dollars from the private sector without providing any longer-term security in exchange.

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