US budget deficit on track to hit US$1 trillion mark

Waves from the East River are seen in front of the Brooklyn Bridge and the skyline of Manhattan in New York, on Jan 7, 2019.
Waves from the East River are seen in front of the Brooklyn Bridge and the skyline of Manhattan in New York, on Jan 7, 2019.PHOTO: AFP

WASHINGTON • The US federal budget deficit continued to rise in the first quarter of fiscal 2019, and is on pace to top US$1 trillion (S$1.36 trillion) for the year, as President Donald Trump's signature tax cuts continue to reduce corporate tax revenue, according to the latest data released.

The monthly numbers, released on Tuesday by the Congressional Budget Office, also show an increase in spending on federal debt as rising interest rates drive up the cost of the government's borrowing.

The widening deficit comes despite a booming economy and a low unemployment rate that would typically help fill the government's coffers.

Federal spending outpaced revenue by US$317 billion over the first three months of the fiscal year, which began in October, the budget office reported.

That was 41 per cent higher than the same period a year ago, or 17 per cent after factoring in payment shifts that made the fiscal 2018 first-quarter deficit appear smaller than it actually was.

The report did show one area of increasing revenue - from Mr Trump's sweeping tariffs.

Revenue from levies on imported steel, aluminium and Chinese goods were up US$8 billion from the same quarter a year ago, an 83 per cent increase.

 
 
 

That increase, however, is nowhere close to the levels needed to support Mr Trump's frequent claims that his tariffs will help pay down the national debt.

This fiscal year is the first to fully incorporate the reduced tax rates that Mr Trump signed into law in late 2017, including cuts for individuals and closely held businesses and steep reductions for corporations.

Corporate tax receipts fell by US$9 billion for the quarter, or 15 per cent. Individual receipts fell by US$17 billion, or 4 per cent. Interest costs on the debt rose by US$16 billion for the quarter, or 19 per cent.

Interest costs for last month were up 47 per cent from the same month in 2017.

"It is entirely predictable and utterly depressing," said Ms Maya MacGuineas, the president of the Committee for a Responsible Federal Budget, which advocates deficit reduction.

"At a time when we should be working to keep the strong economy going and bring our debt down, our lawmakers seem unwilling to pay for anything, and they just keep adding to the debt," she noted.

A version of this article appeared in the print edition of The Straits Times on January 10, 2019, with the headline 'US budget deficit on track to hit US$1 trillion mark'. Print Edition | Subscribe