–Formal FY’19 Deficit $984 Bln, Biggest Since 2012; Adjusted Deficit $1 trillion
By Denny Gulino
US TREASURY DEPT (MaceNews) – The formal deficit for the government’s fiscal year was $984 billion, the Treasury announced Friday, and after eliminating some calendar quirks, the red ink totaled $1 trillion, a head start on what congressional estimators say will be deficits that big and more through at least 2029.
The deficit’s proportion of GDP was 4.6%, eight tenths of a percent higher than FY 2018. The non-partisan Congressional Budget Office projects that proportion won’t get worse through the next decade unless interest rates, and the cost of financing the public debt, goes higher than expected.
Deficit doves have pointed to that projection as a reason not to panic about skyrocketing public debt.
Deficit hawks say interest rates someday, perhaps soon, will inevitably climb, making one part of the budget, the category of payments of interest on that debt, a monstrous drag on everything else. In any event, they quote the CBO as saying that percentage should be a warning since it is “well above the average over the past 50 years.”
Even with historically low rates, the government had to spend $573 billion in the 12 months through September servicing the debt, 10% more than the previous year. That was already close to the $654 billion spent on defense and about half what was spent on Social Security payments.
For September alone, there was a budget surplus of $83 billion, with a surplus not uncommon in a month when the government is flooded with corporate tax revenue.
Corporate tax revenue rose 5% for the year, most of it since February. Individual tax revenues rose 3%. Net of refunds, however, corporate taxes declined 9% from October through May, when rates previous to the 2017 tax cut were still in effect, and then rose 45% from June through September.
Total receipts were $3.462 trillion, 4% above FY2018, helped by the surge in tariff revenue, the 70% increase to $73 billion imposed as the trade dispute with China escalated. Something of a mirror image is the way the tariff revenue was repurposed at farm subsidies grew, up 10% to bring the subsidy total to $150 billion..
Total outlays were $4.447 trillion, 7% more than the previous fiscal year. The gap, the deficit, was $205 billion more than the 12 months through September 2018.
The September budget report, as the final month in the government’s fiscal year, gets special treatment, accompanied by a statement from Treasury Secretary Steven Mnuchin.
“President Trump’s economic agenda is working,” Mnuchin said, not referring to budget policy which during his campaign Trump said was to turn deficits into annual surpluses. Mnuchin did acknowledge that the deficit path ahead, which every budget authority as well as the Federal Reserve has said is unsustainable, has to be improved.
“In order to truly put America on a sustainable financial path, we must enact proposals – like the president’s 2020 budget plan – to cut wasteful and irresponsible spending,” he said.
While the president’s proposals would preserve defense spending while slashing social safety net spending, Congress has been held to a much more balanced spending pattern, with little emphasis on overall cuts.
The deficit has now widened four years in a row, the first time that happened was 1980 to 1983 in the Carter-Reagan years.
The record deficit was after the financial crisis triggered government support for the banking system, 2009’s $1.4 trillion at the beginning of President Obama’s term. By the time his two terms were over, the deficit was less than $600 billion. After two full fiscal years of the Trump administration the deficit has widened again by about half.
The total public debt keeps growing. The CBO in August said, “As a result of those deficits, federal debt held by the public is projected to grow steadily, from 79 percent of GDP in 2019 to 95 percent in 2029—its highest level since just after World War II.