Published: Fri, October 19, 2018
Business | By Eloise Houston

Federal Deficit Largest Since 2012

Federal Deficit Largest Since 2012

The cost of financing the deficit have increased following Trump's tax cuts, with the interest charged on the 10-year U.S. Treasury note rising to roughly 3.15 percent from 2.46 percent at the start of the calendar year.

New government spending also expanded the federal deficit for the 12 months through September, the first full annual budget on the watch of U.S. President Donald Trump.

In order to address the ballooning deficit and national debt, which has skyrocketed to more than $21.6 trillion (interest alone on that exceeds $523 billion), Trump announced an initiative to cut spending by 5 percent across his Cabinet's departments.

"This year's deficit amounts to US$6,200 per household and is more than we spend each year on Medicare or defence", Maya MacGuineas, the committee's president, said in a statement.

The Trump administration in July sharply revised higher its deficit estimates for coming years when it released its mid-session budget review.

The government's fiscal year runs from October 1 to September 30.

The current fiscal year is likely to see an even larger deficit, potentially in excess of $1 trillion.

Trump frequently criticised Obama for running up the deficit, and in 2012 recommended banning lawmakers from re-election if Congress couldn't balance the budget.

Revenues generally tumbled after December when Trump signed into law US$1.5 trillion of tax cuts over the next decade. Tax revenue dropped from 17.2 percent of the U.S. GDP to 16.5 percent, while overall federal government spending rose by 3 percent.

The deficit worsened because tax revenues are not keeping pace with government spending. Trump's corporate tax cuts brought the United States in line with the rest of the world, thereby increasing US competitiveness in a global market.

"We'd be comparing temporary upkicks in the economy that get revenues up - if it happens - with permanent changes in spending and taxes that will bring the deficit up", he noted.

During a strong economy, the government typically collects more taxes, resulting in a lower budget deficit. "The fact that our government is closing in on trillion-dollar deficits in the midst of an economic expansion should be a serious issue for voters and candidates", William Hoagland, its senior vice president, said of next month's USA congressional elections.

White House Budget Director Mick Mulvaney blamed Congress, which he said had shown a "continual unwillingness to restrain spending".

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