Large and sustained federal budget deficits are harmful to the fiscal health of the United States. Yet policymakers struggle with reining in the red ink. Even as the U.S. economy expands, the federal government continues to run large and growing budget deficits that will soon exceed $1 trillion per year. It is an ominous trend. BPC’s economic policy team analyzes the government’s running budget deficit on a monthly basis, using data from the Congressional Budget Office’s Monthly Budget Review. This BPC tracker is updated every month.
July 10, 2018
In June, the federal government produced a monthly budget deficit of $75 billion, bringing the cumulative Fiscal Year 2018 deficit to $607 billion. This year’s deficit is $84 billion higher than last year’s cumulative deficit over the same period. The primary reason on the spending side is interest payments, which have increased by 17 percent ($39 billion) through the month of June compared to the same period in 2017. Spending on the three largest mandatory programs—Social Security, Medicare, and Medicaid—has increased by 4 percent ($115 billion) versus the comparable period in 2017. On the revenue side, corporate income taxes are 28 percent lower ($62 billion) compared to the same period in 2017. About a third of this dip occurred in June, which CBO attributes to a decrease in corporate tax collection largely due to the implementation of the Tax Cuts and Jobs Act of 2017. Provisions lowering the corporate tax rate and expanding the ability of corporations to immediately deduct the full value of equipment purchases particularly had an impact on the revenue decline. But overall revenues have increased slightly compared to last year, driven by individual income and payroll tax collections, which rose by 5 percent ($105 billion) compared to the same period in 2017. This increase is partially attributable to a growing workforce and increases in wages and salaries subject to taxation.
June 7, 2018
The federal government produced a monthly budget deficit of $144 billion in May, up from $88 billion during the same month last year. May’s shortfall brings the cumulative Fiscal Year 2018 deficit to $530 billion, 22 percent higher than last year’s cumulative deficit over the same period. CBO attributes the increased deficit through last month in part to increases in interest spending, up 15 percent (or $32 billion) compared to this point last year. In the month of May alone, interest payments rose by 26 percent (or $7 billion) compared to May 2017, perhaps partially reflecting the trend of rising rates on U.S. Treasury securities. Also, corporate tax collections through May fell by 25 percent (or $42 billion) compared to the same period in FY2017. Conversely, individual income and payroll tax payments through May were up 6 percent (or $109 billion) compared to the same point last year. Spending increases in Medicare, Medicaid, defense, and other programs also contributed to the year-over-year deficit increase in FY2018 to date.
May 7, 2018
As usual, April produced a monthly budget surplus, as the government received hundreds of billions of dollars in tax returns during the month. An extraordinary $218 billion surplus in April prompted the cumulative 2018 budget deficit to shrink to $382 billion so far this fiscal year. Last year, the government had accrued a smaller $344 billion deficit through April, and the year before it was even lower. CBO partly attributes this year’s larger deficit to increases in interest spending (up 14 percent vs. last year), Department of Homeland Security spending (mainly disaster relief), as well as increases in spending on Social Security and defense. At the same time, revenues are up overall compared to last year, due mainly to an 8 percent increase from individual income and payroll taxes. Conversely, corporate income taxes declined precipitously compared to last year (by 22 percent), which may reflect behavior influenced by the recent tax legislation.