US posts its biggest budget deficit since 2012

The president cut income tax and slashed the corporate rate from 35 per cent to 21 per cent

The Treasury Department has maintained that the tax cuts will end up paying for themselves amid economic growth.

The Treasury Department announced on Monday that it had recorded its largest monthly budget deficit in six years in February.

Revenues were down 9%, at $156 billion, in February from the same month previous year, with withholding taxes falling by $5 billion, or 2%. That trend reflects new guidance issued in January by the Internal Revenue Service over how much of employees' paychecks should be withheld based on the new tax rules, according to the CBO.

For the first five months of fiscal 2018, which began October 1, the federal budget deficit totaled $390.97 billion, an increase of 11.5 percent compared to the same period a year ago.

It was also $23 billion higher than the deficit for the same month previous year.

Over the 12 months ended February - Donald Trump's first full year in office - the deficit widened to $703 billion (3.6% of GDP), up from $583 billion (3.1% of GDP) over the prior 12-month period.

Critics of the plan have expressed concerns that the government's debt would increase under the plan.

A combination of tax cuts passed by the Trump administration late previous year and an increase in government spending agreed in early February are set to add to the nation's budget gap with $1 trillion annual deficits on the horizon.

There were four consecutive $1-trillion deficits under President Barack Obama but they resulted from a historic financial crisis, a recession and stimulative spending.

The Committee for a Responsible Federal Budget, a non-partisan group that opposes deficit spending, released a report earlier this month projecting that $1 trillion deficits will return next year with the annual deficit hitting $2.4 trillion in 10 years.

Information for this article was contributed by Sarah McGregor of Bloomberg News.

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