U.S. Treasury Secretary Steven Mnuchin. (Jonathan Hayward/AP)
America’s budget deficit ballooned to $779 billion in 2018, the federal government said on Monday, as higher spending and stagnating tax revenue pushed the nation’s debt burden higher.
The approximately 17 percent jump in the federal deficit came despite strong growth in the overall U.S. economy, an unusual instance in which the economy and the deficit are expanding at the same time. Typically, strong economic growth translates into lower deficits as the government collects more from taxpayers.
“What’s going on is revenues are not rising when they otherwise would be,” said Marc Goldwein, senior vice president of the Committee for a Responsible Federal Budget. “The economy is growing by 5 to 6 percent, and revenue is basically flat.”
Business tax revenue was depressed in part because the Republican tax law passed in the fall of 2017 reduced the corporate tax rate from 35 percent to 21 percent, among other changes.
The federal deficit was $665 billion in 2017, according to the Congressional Budget Office.
Federal spending also rose in 2018, with increases in spending on Social Security, the military and interest payments, among other key expenses, according to Goldwein.
Real wages grew by 1.4 percent, and household income grew by 1.8 percent, according to the report released by the Treasury Department and Office of Management and Budget.
The federal deficit is a measure of the gap between the amount of money the nation spends and the amount it takes in. Closing the federal deficit requires either raising taxes, cutting the defense budget or lowering spending on social programs that protect the poor and elderly, such as Medicare and Social Security.
This year’s budget deficit was the highest in six years. Annual deficits topped $1 trillion from 2009 to 2012 under President Barack Obama, driven by greater spending on social-safety-net programs and economic stimulus, as well as slumping tax receipts as the economy cratered.
Treasury Secretary Steven Mnuchin said in a news release that President Trump had “proposals to cut wasteful spending” that would eventually put the nation on sustainable fiscal footing. The Republican tax law signed by Trump is expected to add at least $1.9 trillion to the federal debt, including interest payments, according to the Congressional Budget Office.
Mnuchin defended higher military spending under Trump.
“President Trump prioritized making a significant investment in America’s military after years of reductions in military spending undermined our preparedness and national security,” Mnuchin said. “Going forward, the president’s economic policies that have stimulated strong economic growth, combined with proposals to cut wasteful spending, will lead America toward a sustainable financial path.”
In response to Mnuchin’s statement, Sen. Bernie Sanders (I-Vt.) blamed Republicans for the deficit. Sanders’s office produced an analysis saying that the United States would be running a surplus without the tax cuts passed under Trump and President George W. Bush, higher military spending after the terrorist attacks of Sept. 11, 2001, and the costs of the wars in Iraq and Afghanistan.
“Without Republicans’ tax cuts, war-fighting, and defense buildup since 2001, the federal budget would have been $156 billion in surplus,” Sanders said.