WASHINGTON (AFP) - The US budget deficit hit a six-year high of US$779 billion (S$1.07 trillion) in the most recent fiscal year, the Treasury announced on Monday (Oct 15), underscoring the cost of last year's sweeping tax cuts.
President Donald Trump hails the tax cuts as a boon to the economy, but corporate tax receipts dropped sharply and America's growing debt burden to finance the deficit became increasingly costly, the Treasury Department said.
In the 2018 fiscal year, which ended September 30, the United States took in US$3.3 trillion but spent US$4.1 trillion.
That sent the deficit up 17 per cent or US$113 billion, to its highest level since 2012, according to the Treasury report.
The deficit also grew as a share of the economy, rising to 3.9 per cent of GDP, up from 3.5 per cent in the 2017 fiscal year, the report showed.
But with GDP expanding by 4.2 per cent in the second quarter of the year, the White House is banking on faster growth to pay for December's tax cuts.
"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," Treasury Secretary Steven Mnuchin said in a statement.
BORROWING JUMP US$1 TRILLION
The White House budget blueprint issued in February for the 2019 fiscal year abandoned the long-held Republican goal of balancing the budget within a decade, instead projecting deficits into the foreseeable future.
The non-partisan Committee for a Responsible Budget said Monday that America's financial imbalances were "no longer a problem for the future."
"This year's deficit amounts to US$6,200 per household and is more than we spend each year on Medicare or defense," Maya MacGuineas, the committee's president, said in a statement.
Total receipts increased only slightly, in part due to higher tax payments from individuals, but those were more than offset by "lower net corporation income tax receipts," which fell 22 per cent, Treasury said in a statement.
Government outlays rose US$127 billion, with the biggest increase from the Treasury Department, largely due to debt servicing costs.
Total government borrowing increased by US$1 trillion in the latest fiscal year to US$15.75 trillion, including US$779 billion to finance the deficit.
Interest expense on government debt increased 14 per cent or US$65 billion due to the higher debt level as well as rising interest rates, a Treasury official told reporters.
Military spending also rose by six per cent or US$32 billion, while the cost of Social Security, the US national retirement system, rose four percent. Education spending dropped US$48 billion, a 43 per cent reduction.