U.S. Deficit Up for First Time Since 2009 on Spending SurgeBy
Receipts rise 1%, outlays increase 5% in year, Treasury says
Deficit as a share of GDP near 40-year average: Treasury
The U.S. budget deficit as a share of the economy widened for the first time in seven years, marking a turning point in the nation’s fiscal outlook as an aging population boosts government spending and debt.
Spending exceeded revenue by $587.4 billion in the 12 months to Sept. 30, compared with a $439.1 billion deficit in fiscal 2015, the Treasury Department said Friday in a report released in Washington. That was in line with a Congressional Budget Office estimate on Oct. 7 for a shortfall of $588 billion. As a share of gross domestic product, the shortfall rose to 3.2 percent from 2.5 percent a year earlier, the first such increase since 2009, government figures show.
“The slowdown in tax collections suggests some cooling in labor market activity,” said Gennadiy Goldberg, a strategist at TD Securities LLC in New York. He sees the higher budget deficits implying more borrowing needs by Treasury.
The rising deficit also comes amid warnings from the International Monetary Fund last week of the risks of increasing debt loads, which it says complicates the task for policy makers who have pledged to use fiscal policy to give the global economy a fillip.
Debt levels are seen rising under both U.S. election candidates. Democratic nominee Hillary Clinton’s spending proposals include $275 billion for infrastructure and $350 billion on making college more affordable. Her proposals would add $200 billion to $1.8 trillion to deficits, according to recent independent economists’ projections. She has proposed tax increases for the wealthy to help fill the gap.
Donald Trump, the Republican candidate, has pledged to cut taxes and spend as much as $500 billion on infrastructure programs. Projections of the impact of his proposals say he’d increase the national debt by roughly $5 trillion over 10 years. Trump says his proposals would boost economic growth, which in turn would help reduce the federal debt.
The Treasury said receipts in fiscal 2016 totaled $3.27 trillion, or 17.8 percent of GDP, while spending totaled $3.85 trillion, or 20.9 percent of GDP. Receipts rose $18 billion from fiscal 2015, while outlays jumped $166 billion, the figures showed. The department cited higher spending on Social Security, Medicare, Medicaid and interest on government debt.
For September, which is the final month in the fiscal calendar, the government reported a $33.4 billion surplus. That was lower than the $90.9 billion surplus a year earlier, in part due to calendar adjustments, according to the Treasury.