Despite a strong economy and robust job market, the federal budget deficit swelled to $779 billion in fiscal 2018, up $113 billion from 2017, according to final numbers released Monday by the Treasury Department.
The 17 percent increase from 2017 brought the deficit to the highest level in six years. As a share of the economy, the deficit was 3.9 percent, up from 3.5 percent the year before.
The deficit grew as tax revenues failed to keep pace with rising government spending. Revenues were roughly flat, up 0.4 percent over 2017, while spending increased by 3.2 percent, driven by higher spending on the military (up $32 billion, or 5.6 percent), Social Security (up $39 billion, or 3.9 percent), Medicaid (up $14.5 billion, up 3.9 percent) and disaster relief (up $12.4 billion, or 140 percent). Interest on the debt rose to $325 billion, up $62 billion over 2017.
Corporate income tax revenues fell from $297 billion to $205 billion. Individual income tax receipts, meanwhile, grew from $1.59 trillion to $1.68 trillion.
As a share of the economy, both revenues and spending were lower in 2018 than in 2017, but revenues fell more sharply, leading to the deficit increase.
Trump administration officials have argued that the tax cuts passed last year will unleash faster economic growth, which would help offset the costs of the tax cuts and reduce the deficit over time. They’ve also sought to lay the blame for the rising deficit on higher government spending, even as critics argue that the deficit would have fallen in 2018 if not for the Republican tax cuts.
"The president is very much aware of the realities presented by our national debt," Mick Mulvaney, director of the White House Office of Management and Budget, said in a statement Monday. "America's booming economy will create increased government revenues — an important step toward long-term fiscal sustainability. But this fiscal picture is a blunt warning to Congress of the dire consequences of irresponsible and unnecessary spending."
The bottom line: It’s unusual to see deficit soaring in a briskly growing economy. “What’s going on is revenues are not rising when they otherwise would be,” Marc Goldwein of the Committee for a Responsible Federal Budget told The Washington Post. “The economy is growing by 5 to 6 percent, and revenue is basically flat.” While Trump administration officials and Republicans have argued that their tax cuts would pay for themselves, that isn’t happening thus far.
The deficit is projected to keep growing, potentially reaching $1 trillion as soon as fiscal 2019 — and staying above that level barring some action by lawmakers. “Over the course of the next year, new spending priorities will dig the hole deeper,” said G. William Hoagland, senior vice president at the Bipartisan Policy Center. “Damage from unforeseen natural disasters such as hurricanes will also require federal assistance and add to the growing deficit.”