Washington, D.C. – The first monthly budget review for fiscal year 2017 published today by the Congressional Budget Office showed the federal budget deficit for October was $46 billion. The report also included CBO’s final estimate for the FY 2016 budget deficit: $587 billion, up $102 billion over the prior fiscal year—the first annual increase since FY 2011.
Of the $102 billion increase, $41 billion is attributable to benefit payments that would have gone out in FY 2016 had October 1 (the start of FY 2017) not fallen on a weekend, causing payments to be made early. The remainder of the $102 billion deficit increase was due to a 4.2 percent rise in spending on the federal government’s three largest entitlement programs (Social Security, Medicare, and Medicaid), a 9 percent increase in interest on the national debt, and a 12.9 percent decrease in revenue from corporate income taxes. The result is that combined spending on the big three entitlement programs reached its all-time high (as a percentage of gross domestic product) in FY 2016, while corporate income tax revenues fell to their lowest level since FY 2012.
“Rising annual deficits are a long-term challenge that will confront all federal policymakers elected tomorrow. With the economy showing positive signs on employment, now is the right time to phase in commonsense deficit reduction policies rather than waiting for an economic downturn that could exacerbate the situation,” said Shai Akabas, director of fiscal policy at the Bipartisan Policy Center.
“We do need targeted investments and tax changes to continue growing the economy and creating jobs, but these policies shouldn’t be made in a vacuum that ignores fiscal responsibility,” Akabas said.
Shai Akabas is available for comment.