The U.S. budget deficit grew to $779 billion in fiscal 2018 — the highest level since the height of the Great Recession — as President Donald Trump’s tax cuts ate into corporate tax revenues.
The Treasury Department reported on Monday that the budget shortfall increased by $113 billion, or nearly 17%, from 2017.
Administration officials attributed the increase to greater federal spending, including the military and domestic budget increases that President Trump approved this year, not the $1.5 trillion tax cut.
“President Trump prioritized making a significant investment in America’s military after years of reductions in military spending undermined our preparedness and national security,” Treasury Secretary Steven Mnuchin said in a statement. “Going forward, the president’s economic policies that have stimulated strong economic growth, combined with proposals to cut wasteful spending, will lead America toward a sustainable financial path.”
But as The New York Times reports, Treasury’s own numbers “suggest falling revenues were a far larger contributor to the rising deficit than higher spending.”
Federal outlays increased for the fiscal year but, because the economy grew at a faster pace than outlays did the previous year, they fell as a share of the economy, to 20.3% from 20.7%. Federal revenues rose by 0.4%, compared to 1.5% between 2016 and 2017.
Revenues are now nearly a percentage point lower than their average for the past 40 years, the Treasury Department said.
“The big revenue drop came on the business side,” the Times said, noting that corporate tax revenues fell by a third from a year ago, “a direct consequence of the tax law signed last year, which reduced the top corporate rate to 21 percent from 35 percent.”
According to economists, the mounting annual deficits — expected to exceed $1 trillion as soon as next year — are unusual in a time of robust economist growth. GDP growth surged 4.2% percent in the second quarter, but the deficit is the largest since 2012 when it hit $1.089 trillion.
The Trump administration has proposed dramatic spending cuts at several government agencies to reduce deficits but even many Republicans have rejected the severity of the proposed cuts.