The United States government ended fiscal year 2019 with the largest budget deficit in seven years, as gains in tax receipts were offset by higher spending and growing debt service payments, the US Department of the Treasury said on Friday.
The figures reflect the second full budget year under US President Donald Trump, a Republican, and come at a time when the country has an expanding tax base – with strong economic growth and an unemployment rate currently near a 50-year low.
The budget deficit widened to $984bn, which was 4.6 percent of the nation’s gross domestic product (GDP).
The deficit for the previous fiscal year – which runs through the end of September – was $779bn, with a deficit-to-GDP-ratio of 3.8 percent. Total revenue increased by four percent but outlays rose by 8.2 percent.
The deficit reached a peak of $1.4 trillion in 2009 as the administration of former US President Barack Obama and Congress took emergency measures to shore up the nation’s banking system during the global financial crisis and provide stimulus to an economy in recession.
The annual budget deficit had been reduced to $585bn by Obama’s second term in 2016, but Republicans in Congress during that time criticised the Democratic president for not reducing it further.
Since then, the budget deficit has jumped due in part to the Republicans’ overhaul of the tax system. In the short term, that sharply reduced corporate tax income revenues and was accompanied by an increase in military spending.
By the end of fiscal year 2019, corporate tax payments were up five percent. Customs duties, which have been boosted by the Trump administration’s trade war with China and others, were up 70 percent year-on-year.
There was also higher spending on defence, healthcare and Social Security programmes. The US has an ageing population, and economists have warned that the cost of mandatory spending on Social Security and Medicare will become fiscally unsustainable.
Earlier this year, the US Congress passed a two-year budget deal backed by Trump that would increase federal spending on defence and other domestic programmes.
Some of the widening of the deficit came from more spending on interest payments on the national debt, as borrowing has increased over the past year.
For September, the US government recorded an $83bn surplus, a 31 percent drop from the same month last year – when quarterly tax estimate payments typically augment receipts by a significant amount.
When accounting for calendar adjustments applied to the whole year, the adjusted deficit was $1 trillion.
In Washington, a presidential impeachment inquiry has overshadowed prospects of a looming government shutdown – which will occur on November 21 if funding for federal operations is not approved by then.