United States Posted Largest-Ever Monthly Budget Deficit in February
The federal government posted its biggest monthly budget deficit ever in February as a sharp decline in corporate revenue coincided with increased spending, the Treasury Department announced Friday.
The budget gap widened to $234 billion in February, compared with a fiscal gap of $215.2 billion a year earlier.
That surpasses the old February deficit record of $232 billion set in 2012, the last time the deficit for the year topped $1 trillion.
February’s shortfall helped push the deficit for the first five months of the government’s fiscal year to $544.2 billion, up almost 40 percent from the same period the previous year, the department said.
Tax receipts declined for corporations in the five-month period, while revenue from customs duties almost doubled, boosted by income from tariffs imposed by the Trump administration.
The 2017 Republican tax cut reduced the corporate tax rate from 35 percent to 21 percent.
As a result, corporations have so far this fiscal year paid $59.2 billion, compared to $73.5 billion in 2018, when the tax law was only partially in effect for some corporations.
In 2017, the year before the law was enacted, corporations had paid $87.4 billion by this point in the fiscal year.
The situation is not bound to change anytime soon.
In its new budget sent to Congress last week, the administration is projecting that this year’s deficit will total $1.09 trillion and will remain above $1 trillion for the next four years.
“A $234 billion budget deficit is an eye-opening number,” said Robert Bixby, executive director of the Concord Coalition, a bipartisan advocacy group that promotes seeking an end to deficit spending and a balanced federal budget. “Clearly, we’re not growing our way out of a total mismatch between spending and revenues.”
However, Bixby said, “What really surprises me is that anybody is surprised by this.”
The Concord Coalition has been advocating for budgetary responsibility since 1992. According to Bixby, the group argues for a “sustainable fiscal policy.”
“We don’t say we need a balanced federal budget every year or that we need big tax increases to close the deficit. But what we do say is that you should try to have revenues match expenditures and that you just can’t allow spending to grow on auto pilot,” he said.
“What today’s Treasury report illustrates is part of a pattern of a long-term increase in debt relative to GDP,” Bixby continued. “What’s scary is that it is happening now in a fairly strong economy.
“It makes you wonder what will happen if the economy slows down or if, as has been said, we really are on the verge of a recession,” he said.
Michael A. Peterson, CEO of the Peter G. Peterson Foundation, a foundation dedicated to increasing public awareness of the nation’s key fiscal challenges, said that unfortunately, the Treasury’s report suggests that “we will have to get used to deficits growing every year unless we start managing our debt problem.”
“This is the structural deficit at work, increasing our borrowing and compounding interest every year,” Peterson said. “It’s the definition of unsustainable.
“More important than any one month’s deficit increase is the clear upward trend of the record national debt, and the staggering interest costs that go with it,” he continued. “Interest costs are now the fastest growing ‘program’ in the budget, will exceed what we spend on national defense in five years and will total $7 trillion over the next ten years. This is not the way to build the future that Americans want or deserve.”
Also concerned about upward spiraling deficits is Federal Reserve Chairman Jerome Powell who warned Wednesday that the government’s finances are unsustainable.
“I do think that deficits matter and do think it’s not really controversial to say our debt can’t grow faster than our economy indefinitely — and that’s what it’s doing right now,” Powell said at a press conference following the central bank’s monetary policy decision. “I’d like to see a greater focus on that over time.”
In related financial news on Friday, President Donald Trump said Friday that he will nominate Stephen Moore, a conservative economic analyst and frequent critic of the Federal Reserve, to fill a vacancy on the Fed’s seven-member board.
Moore served as an adviser to Trump during the 2016 campaign and helped draft Trump’s tax cut plan.