By Kate Davidson
WASHINGTON -- The U.S. budget gap widened further in July as federal spending outpaced revenue collection, bringing the deficit to $867 billion so far this fiscal year, a 27% increase from the same period a year earlier.
The Treasury Department said Monday federal receipts rose 3% from October through July, totaling $2.9 trillion, while outlays climbed 8%, to $3.7 trillion. A senior Treasury official said federal revenue collection has picked up significantly since April compared with a year earlier, when lower tax rates implemented under the 2017 tax overhaul weighed on receipts.
At the same time, rising enrollment in Medicare and higher interest rates have led to higher government costs on benefits and interest payments, pushing the deficit even higher despite robust economic growth that usually shrinks budget shortfalls.
Part of the increase in the deficit so far this fiscal year, which began Oct. 1, can be attributed to calendar quirks, which made the gap appear slightly larger. If not for a shift in the timing of certain payments, the deficit would have been 20% higher during the first 10 months of the fiscal year, the Treasury said.
Higher deficits have forced the government to ramp up borrowing since early 2018, due in part to slumping revenue following the tax cut and a 2018 budget deal that lifted domestic and military spending for two years.
Over the 12 months that ended in July, the deficit totaled $961.8 billion, or 4.5% as a share of gross domestic product. Revenues over the previous 12 months rose 2.4%, while federal spending was up 6.3%.
Much of the increase in revenue collection so far this fiscal year has occurred in the past few months, the senior Treasury official said, thanks in part to a sturdy economy that has boosted tax receipts. Net individual taxes are up 7% since April, or $42 billion, and net corporate taxes have grown 30% since then, the official said.
Revenue from tariffs, or customs duties, also increased 75% through July, a significant boost from the same period a year earlier but just 2% of total receipts collected during that time.
The Treasury said last month it expects to borrow more than $1 trillion this calendar year for the second year in a row, as the annual budget gap is on track to exceed $1 trillion for fiscal year 2019, which ends Sept. 30.
A recently enacted budget deal, which President Trump signed earlier this month, will maintain the current government spending trajectory and add further to federal deficits over the next two years.
More broadly, deficits are projected to continue rising over the coming decades as a wave of retiring baby boomers pushes up government outlays on Social Security and Medicare.
Write to Kate Davidson at firstname.lastname@example.org
(END) Dow Jones Newswires
August 12, 2019 14:55 ET (18:55 GMT)Copyright (c) 2019 Dow Jones & Company, Inc.