Annual US budget deficit hits $779 bn, highest since 2012 -US Treasury

Annual US budget deficit hits $779 bn, highest since 2012 -US Treasury

That would be the first time the deficit exceeds $1 trillion since 2012, when the American economy was still recovering from the Great Recession. This is 17 percent higher than last year, and larger than any year since 2012.

There are two things that can expand a deficit: Decreased tax revenues and increased spending.

So far, however, the trend is pointing in the opposite direction, according to the budget report.

In an effort to finance the yawning budget gap, Treasury has signaled it will step up the pace of debt issuance, borrowing $769 billion in the second half of the current calendar year.

Economists likewise say the aging population will strain the Social Security system, adding to pressure on the deficit over time.

He said that while a good economy would increase government revenue, "this fiscal picture is a blunt warning to Congress of the dire consequences of irresponsible and unnecessary 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.

Higher defense spending, plus increases in Medicaid, Social Security and disaster relief were contributing factors.

Ahead of next month's hard-fought mid-term elections, in which control of the House of Representatives hangs in the balance, Republicans have largely avoided campaigning on the tax cuts.

"It's an unsustainable fiscal course that will lead us to debt overtaking the size of the entire economy in as soon as a decade, and not long after topping all-time highs as a share of the economy not seen since World War II", said Maya MacGuineas, president of the Committee for a Responsible Federal Budget, which advocates for balancing the budget, in a statement. Typically, strong economic growth translates into lower deficits as the government collects more from taxpayers. Corporate income-tax receipts fell 31 percent in fiscal 2018 while individual income taxes gained 6.1 percent, according to Treasury data.

Interest expenses on government debt increased 14 per cent or United States dollars 65 billion due to the higher debt level as well as rising interest rates, a Treasury official told reporters.

Military spending also rose by six per cent or US$32 billion, while the cost of Social Security, the USA national retirement system, rose four percent.

Military spending rose $32 billion while education spending dropped $48 billion, a 43 per cent reduction.

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