NPR affiliate WBGH in Boston has reported that the federal budget deficit grew 17 percent during the recently ended fiscal year to $779 billion. It is the fifth-highest federal budget deficit in U.S. history, and the largest from a year in which the United States was not involved in a war or mired in an economic recession.
The 2018-19 budget shows a deficit of nearly $1 trillion, as government spending has increased while tax revenue has been slashed. Corporate tax collections in the past fiscal year fell by 31 percent after the corporate tax rate was cut from 35 percent to 21 percent. The Joint Committee on Taxation projects that the tax cuts will increase growth 0.7 percent per year, which will offset some of the revenue lost from tax cuts. The Joint Committee expected that over the course of the next 10 years, the U.S. government debt would only increase $1.5 trillion.
“The President is well aware of the realities presented by our national debt,” said White House budget director Mick Mulvaney, while also insisting that accelerating economic growth will eventually allow tax receipts to exceed budget deficits. Mulvaney blamed government spending for the deficit, even though government spending rose just 3 percent and actually shrank as a share of the economy. The Treasury Department’s year-end fiscal report was broadly in line with the projections and expectations of the White House and Congress.
The federal budget deficit typically grows during recessions, when the government collects less tax revenue while providing more government assistance as well as using government spending to stimulate the economy. During periods of economic growth, the deficit usually shrinks. So the current spike in the federal budget deficit at a time of low unemployment and strong economic growth is a break from historical precedent.
The Trump administration will set new records for military spending, according to The Balance. It is estimated that the administration spent nearly $875 billion this year and will spend $885 billion next year. U.S. military spending is greater than the next 10 largest government expenditures combined. The two greatest potential military threats to the United States — China and Russia– have 25 percent and 10 percent, respectively, the amount of military spending of the U.S.
Mandatory spending on government programs such as Medicare and Social Security remains the largest part of federal government spending, as it has exceeded $2 trillion a year for the past seven years.
The measures marked a change in policy from Congress, who in 2011 voted for sequestration of the national debt, only to grant a two-year reprieve from sequestration last year.