Federal Deficit Just Shy of $1 Trillion for 2019, Highest Since 2012
WASHINGTON – The federal deficit for fiscal year 2019 was $984 billion, $205 billion more than in the prior fiscal year, Treasury Secretary Steven Mnuchin announced Friday afternoon.
The final accounting from the Treasury Department of the Office of Management and Budget confirmed a projection released earlier this month by the Congressional Budget Office.
This is the first year since 2012 that the federal deficit came so close to the $1 trillion mark. As a percentage of GDP, the deficit was 4.6 percent, up from 3.8 percent the previous year.
Total Federal borrowing from the public increased by $1,052 billion during FY 2019 to $16,803 billion.
The increase in borrowing included $984 billion in borrowing to finance the deficit, as well as $67 billion in net borrowing related to other transactions such as changes in cash balances and net disbursements for Federal credit programs.
Yet the White House tried to put the best face it could on the numbers.
Noting that the final deficit number is $16 billion less than forecast in the FY 2020 mid-session review, Mnuchin declared “President Trump’s economic agenda is working.”
“In order to truly put America on a sustainable financial path, we must enact proposals—like the President’s 2020 budget plan—to cut wasteful and irresponsible spending,” the treasury secretary said.
Acting OMB Director Russ Vought was equally rosy, suggesting that “by providing a responsible fiscal path forward and pursuing pro-growth reforms, President Trump’s agenda will make America’s economic expansion enduring.”
Governmental receipts totaled $3,462 billion in FY 2019. This was $133 billion higher than in FY 2018.
As a percentage of GDP, receipts equaled 16.3 percent, 0.1 percentage point lower than in FY 2018 and 1.1 percentage points below the average over the last 40 years.
The nominal increase in receipts for FY 2019 can be attributed primarily to higher social insurance and retirement receipts, net individual income tax receipts, customs duties, net corporation income tax receipts, and excise taxes, partially offset by lower deposits of earnings by the Federal Reserve, and other miscellaneous receipts, the Treasury Dept. and OMB said.
Outlays grew in FY 2019 to $4,447 billion, $339 billion above those in FY 2018, an 8.2 percent increase.
As a percentage of GDP, outlays were 20.9 percent, 0.7 percentage point higher than in the prior year, and 0.3 percentage points higher than the 40-year average of 20.6 percent.
Contributing to the dollar increase over FY 2018 were higher outlays for Medicare, Social Security, Defense, and interest on the public debt, the departments said.
As a percentage of GDP, borrowing from the public grew from 77.5 percent of GDP at the end of FY 2018 to 79.1 percent of GDP at the end of FY 2019.
Friday’s numbers drew immediate criticism from federal government watchdogs like the Committee for a Responsible Federal Budget, which called the financial course the nation is on unsustainable by any measure.
“A deficit of this size following the longest span of economic growth in history shows just how reckless our leaders have become,” said Committee co-chair Leon Panetta. “This is exactly the time when deficits should be contracting, not expanding. But instead of getting our fiscal house in order and preparing for the next downturn, our leaders continue to binge on debt-fueled tax cuts and spending hikes rather than showing the leadership necessary to set our fiscal path.”
Mitch Daniels, another of the committee’s co-chairs, said the nation is now at a turning point.
“Without action now to phase in reforms over the coming years, Americans will face a much different future than the one that was promised. We can’t wait for another year or another Congress or another president to tackle these challenges,” he said.
Also unhappy with Friday’s report was the CEO of the Peter G. Peterson Foundation, a non-partisan organization that focuses on the nation’s long-term fiscal challenges.
“America remains on the fast track to trillion-dollar deficits, rising rapidly as far as the eye can see,” Michael Peterson said. “With all of the important investments we need to make in our future, we find ourselves in a situation where interest costs are the fastest growing program in the federal budget. That’s not where we want growth. If we stay on this path, we’ll leave our kids and grandkids with diminished resources, opportunity and quality of life. It’s essential that our leaders begin to face this challenge, in order to position the U.S. for a prosperous future and leadership role in the world.”
As for the 2020 budget plan Mnuchin referred to, the nonpartisan Congressional Budget Office has projected that federal debt held by the public would equal 87 percent of gross domestic product by 2029 under the President’s budget, compared to 78 percent in 2019.
The CBO said the president’s budget would reduce the federal deficit between 2020 and 2029, the office and the White House disagree sharply on the numbers. The CBO said the reduction would amount to about $1.5 trillion, which the administration says the reduction would be closer to $4.1 trillion.
Driving the vastly different revenue estimates are marked difference in expectations for wage growth during the period, the CBO said.
The Trump 2020 budget also counts on a $1.5 trillion in heath care spending, mainly due to the proposed repeal of some provisions of the Affordable Care Act and providing block grants to states instead.
Nondefense discretionary spending would also be reduced by $1.0 trillion, while defense spending would increase $0.5 trillion under the Trump plan.
Federal revenues, meanwhile, would also go down, by $0.9 trillion, the CBO said.