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 and updates the Deficit Tracker every month.
End of Fiscal Year 2018
This entry reflects the U.S. Treasury Department’s official end-of-year spending, revenue, and deficit figures for Fiscal Year 2018, as released in its Final Monthly Treasury Statement for Fiscal Year 2018.
The total deficit for FY 2018 is $779 billion, with total spending clocking in at $4.1 trillion and total revenue at $3.3 trillion. The deficit grew by 17 percent ($113 billion) compared to FY 2017 and is the highest federal deficit in six years (since FY 2012). While spending grew by about 3 percent ($127 billion) in FY 2018, revenue grew by less than 1 percent ($14 billion). Disturbingly, federal interest payments on the debt spiked to $372 billion — up 20 percent ($62 billion) from FY 2017 — reflecting the largest year-over-year increase in over a decade (both in terms of nominal and inflation-adjusted dollars).
October 5, 2018
The Congressional Budget Office reports that the federal government generated a $782 billion deficit for Fiscal Year 2018, about 17 percent ($116 billion) higher than the deficit for FY 2017. However, about $44 billion in payments that normally would have been included in FY 2018, which ended Sept. 30, fell on a weekend and instead were made in FY 2019. If not for these payment timing shifts, the FY 2018 deficit would have been even larger, estimated at $826 billion. Revenues in FY 2018 remained almost entirely flat, growing by less than 1 percent. While some revenue sources such as individual income tax collection grew by about 6 percent ($96 billion), others such as corporate income tax collection shrank dramatically by about 31 percent ($92 billion). As revenue stagnated, federal spending continued to climb by 3 percent ($129 billion). Spending on the three largest mandatory programs — Social Security, Medicare, and Medicaid — rose by 4 percent ($73 billion). In continuation of a disturbing trend, interest payments on the federal debt were the fastest growing portion of the budget, up 20 percent ($62 billion) from FY 2017. Total interest payments on the federal debt for FY 2018 were $371 billion, nearly as much as the federal government spent on the Medicaid program over the same period (all spending figures adjusted by CBO to remove the effects of timing shifts).
September 10, 2018
The federal government produced a monthly budget deficit of $211 billion in August, up from $108 billion during the same month last year. The cumulative Fiscal Year 2018 deficit now stands at $895 billion, exceeding by more than $100 billion CBO’s latest projection for that period. It is important to note that due to the calendar, payments of about $68 billion normally made in September were made in August. For this reason, August’s cumulative deficit is larger than it otherwise would have been, which will be offset by a lower deficit in September.
This year’s cumulative deficit is 33 percent ($222 billion) higher than for the same period last year. According to CBO, while federal revenues have increased by 1 percent ($19 billion) over the first 11 months of FY 2018, federal outlays have increased by 7 percent ($240 billion). Outlays rose across all major categories, including interest spending, defense spending, and spending on major entitlement programs. Key drivers of the increased deficit year-over-year in the month of August alone (adjusted by CBO to remove the effects of timing shifts) were: interest spending up 25 percent ($7 billion); defense spending up 10 percent ($5 billion); and Social Security and Medicare spending up 5 percent and 7 percent respectively ($4 billion each).
August 7, 2018
The federal government generated a monthly budget deficit of $75 billion in July, bringing the cumulative Fiscal Year (FY) 2018 deficit to $682 billion. This year’s deficit is 20 percent ($116 billion) higher than last year’s cumulative deficit over the same period. Cumulative interest payments on the federal debt increased again this month relative to the same period last year, totaling $309 billion so far this fiscal year. The Congressional Budget Office attributes this 19 percent ($48 billion) year-over-year increase in interest spending to several factors: a higher rate of inflation, higher interest rates, and a larger debt burden. Other increases in spending compared to July 2017 included a 5 percent increase in spending on Social Security ($4 billion) and an 8 percent increase in defense spending ($3 billion). Total revenues for the month were down about 3 percent ($7 billion). Fiscal year to date, revenues have increased by about 5 percent ($105 billion), despite a 28 percent ($66 billion) drop in corporate tax collections. This drop has been more than offset by an 8 percent ($104 billion) increase in individual income tax collections so far this fiscal year.
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.