The U.S. budget deficit widened to its highest level in six years in February as withholding taxes fell, an early indication of the effects of the Trump administration’s tax cuts.
The Treasury Department reported that the U.S. government had a $215 billion budget shortfall last month, compared to a deficit of $192 billion in the same month last year. Economists polled by Reuters had forecast a $216 billion deficit in February.
Revenues were down 9%, at $156 billion, in February from the same month last year, with withholding taxes falling by $5 billion, or 2%. Spending was up $7 billion, with outlays for net interest on the public debt increasing by 9% to $28 billion.
While economists expect the tax cuts and increased federal growth are expected to boost growth in 2018 and into 2019, annual budget deficits of more than $1 trillion are on the horizon.
The Trump White House has forecast a $833 billion budget deficit for the year that ends Sept. 30, up from $666 billion in the prior year, but analysts think it could be higher.
“Between last [month’s] budget deal and December’s tax bill, the country is on a borrowing spree that will lead to the return of trillion-dollar deficits by next year and $2 trillion within a decade or so,” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget. “We’ve taken fiscal recklessness to a new level and it’s time we begin our recovery.”
Over the 12 months ended February — Donald Trump’s first full year in office — the deficit widened to $703 billion (3.6% of GDP), up from $583 billion (3.1% of GDP) over the prior 12-month period. For the first five months of this fiscal year, the deficit is $391 billion, $40 billion more than the shortfall during the same period last year.
There were four consecutive $1-trillion deficits under President Barack Obama but they resulted from a historic financial crisis, a recession, and stimulative spending.