The US federal budget deficit jumped to $779 billion in fiscal year 2018, the highest level since 2012, according to the Treasury Department.
As the GOP tax bill and massive spending agreement took hold, the deficit rose nearly 17 percent year over year, from $666 billion in 2017.
It is now on pace to top $1 trillion a year before the next presidential election, according to forecasts from the Trump administration and outside analysts.
Administration officials attributed the deficit’s rise to greater federal spending, including the military and domestic budget increases that President Trump approved this year, not the $1.5 trillion tax cut.
According to the Treasury, revenue grew by just 0.4% as spending grew by 3.2%.
The increase in the deficit contradicts Trump and other officials promise that the GOP tax bill would “pay for itself.”
In a possible prelude of what’s to come, corporate tax revenue dropped 31% in fiscal year 2018 while personal income tax revenues ticked up 6.1%.
While corporations pay taxes on a quarterly basis, meaning businesses filed under the GOP tax law for three-quarters of the year, most American households won’t file taxes under the new system until April 2019.
The increase is the wrong direction if the president wants to eliminate all of the US’s debt in eight years, as Trump promised he would do on the campaign trail.
Kevin Hassett, the chairman of the White House’s Council of Economic Advisers (CEA), recently promised Trump would release a plan to get the deficit under control.
Hassett said the plan would focus on spending cuts, possibly including cuts to entitlement programs such as Social Security and Medicare.
According to official projections, the deficit is only going to grow form here on out. The Congressional Budget Office estimated that the budget deficit for 2019 will be just a hair under $1 trillion and will eclipse $1 trillion in 2020, the first deficit of that size since the depths of the financial crisis.
Much of the increase is pegged to recent legislation, according to the Committee for a Responsible Federal Budget. A
recent CRFB report found that legislation passed in the 2018 fiscal year will account for $445 billion worth of fiscal year 2019’s $973 billion budget deficit, or 46% of the total.
In total, legislation enacted in the 2018 fiscal year will add $2.4 trillion in new debt by 2027.
Maya MacGuineas, CRFB’s president, said the new release was an important wake up call for Congress.
“As expected, recent tax cuts and spending increases — all put on the national credit card — are making a bad problem even worse,” MacGuineas said in a statement . “It’s an unsustainable fiscal course that will lead us to debt overtaking the size of the entire economy in as soon as a decade, and not long after topping all-time highs as a share of the economy not seen since World War II.”