US budget deficit hits six-year high of US$779 billion under Donald Trump

The US budget deficit has surged to US$779 billion in the most recent financial year – its highest level in six years as President Donald Trump’s tax cuts caused the government to borrow more heavily to cover its spending.

The US Treasury Department said Monday that the deficit climbed US$113 billion from fiscal 2017. Debt would likely worsen in the coming years with the Trump administration expecting the deficit to top US$1 trillion in 2019, nearly matching the US$1.1 trillion imbalance from 2012.

The deficit worsened because tax revenues are not keeping pace with government spending.

The government’s financial year runs from October to September, unlike calendar years that begin in January. Tax revenues were essentially flat in fiscal 2018, while spending increased 3.2 per cent as Congress gave more funds for military and domestic programmes.

Revenues generally tumbled after December when Trump signed into law US$1.5 trillion of tax cuts over the next decade.

The tax cuts have caused economic growth to accelerate this year with Federal Reserve officials anticipating gains of 3.1 per cent.

But the Trump administration initially promised that the tax cuts would pay for themselves through stronger growth – and there was no sign so far of that happening.