US budget deficit mushrooms in May as revenue falls, Medicare outlays jump

WASHINGTON DC – The United States budget deficit swelled in May from a year earlier as revenue tumbled, and Medicare spending surged, said the Treasury Department on Monday in its first monthly accounting of the government’s finances since a deal was reached to suspend the debt limit and avoid a first-ever federal default.

The May deficit shot up to US$240 billion (S$322 billion) from US$66 billion a year earlier, more than offsetting the US$176 billion surplus recorded in April. The median forecast among economists polled by Reuters was for a deficit of US$236 billion.

Revenues for May totalled US$307 billion, down 21 per cent from US$389 billion a year earlier, with a decline in non-withheld individual income taxes and higher tax return payments accounting for most of the shortfall.

In 2022, more of the non-withheld tax payments had been processed in May, in part because of Internal Revenue Service staffing issues, and capital gains taxes associated with the 2021 tax year were more substantial a year ago at that time.

Outlays rose 20 per cent to US$548 billion, with a tripling of spending on the government-run Medicare health programme for seniors driving much of the increase.

Through the first eight months of the fiscal year, which began in October, the Treasury reported a cumulative deficit of US$1.165 trillion, up from US$426 billion a year earlier.

US President Joe Biden on June 3 signed legislation suspending the US$31.4 trillion cap on US debt until January 2025, after striking a deal with congressional Republicans with just two days to spare before the government was due to run short of the funding needed to cover all of its bills.

Since then, the Treasury has announced plans to rebuild its depleted cash position, which had fallen to below US$23 billion earlier in June and was up to about US$88 billion as at last Thursday. REUTERS