The numbers: The U.S. recorded a $779 billion deficit in the fiscal year ending Sept. 30, an increase of $113 billion, as spending climbed while revenue remained nearly flat.
Outlays grew by $127 billion, or 3.2%, while government receipts rose 0.4%, or $14 billion.
Compared to GDP, the deficit rose to 3.9%, up by 0.4 percentage points.
In September alone, the U.S. recorded a surplus of $119.1 billion.
What happened: Interest on the public debt shot up by $65 billion, or 14%, in part because the Treasury had to increase the principal on its inflation-protected securities. Rising interest rates and a bigger debt also played a role.
Social Security spending rose by $39 billion, or 4%, as America’s population aged, while defense spending rose by $32 billion, or 6%, as Congress authorized more spending.
Education spending saw the biggest decline, falling by 43% or $48 billion, almost entirely due to changes in the estimated subsidy costs of loans and loan guarantees. There also was reduced contribution in profits from government-controlled mortgage buyers Fannie Mae
and Freddie Mac
On the revenue side, corporate taxes dropped by 22%, or $76 billion, as companies enjoyed a smaller rate of tax as well as the ability to immediately deduct the full value of equipment purchases. Individual income taxes edged up by 1%, or $23 billion, as increased employment and higher wages were offset by the lower withholdings, as the Treasury published a modified withholding table.
What they’re saying: “America’s booming economy will create increased government revenues – an important step toward longterm fiscal sustainability. But this fiscal picture is a blunt warning to Congress of the dire consequences of irresponsible and unnecessary spending,” said OMB Director Mulvaney in a statement.
“The federal debt burden has doubled in the past decade to stand at close to 80% of GDP now and projections suggest it will reach 100% by 2030, as the aging of the population drives up spending on pensions and public health care. There are measures that can be taken to reduce the long-run budget deficit, but political opposition will make tackling entitlement reform extremely hard outside of a crisis,” said Paul Ashworth, chief U.S. economist of Capital Economics, in a note published ahead of the final numbers.