US Budget Deficit Rises for 1st Time in 7 Years, More Borrowing Needed
The US budget deficit as a share of the economy widened for the 1st time in 7 years, marking a turning point in the nation’s fiscal outlook as an aging population boosts government spending and debt.
Spending exceeded revenue by $587.4-B in the 12 months to 30 September, compared with a $439.1-B deficit in FY 2015, the US Treasury Department said Friday in a report released in Washington.
That was in line with a Congressional Budget Office estimate on 7 October for a shortfall of $588-B. As a share of GDP (gross domestic product), the shortfall rose to 3.2 from 2.5% a year earlier, the 1st such increase since Y 2009, government figures show.
The slowdown in tax collections suggests some cooling in labor market activity, the higher budget deficits implying more borrowing needs by Treasury.
The rising deficit also comes amid warnings from the International Monetary Fund (IMF) last week of the risks of increasing debt loads, which it says complicates the task for policy makers who have pledged to use fiscal policy to give the global economy a fillip.
Debt levels are seen rising under both US election candidates. Democratic nominee Hillary Clinton’s spending proposals include $275-B for infrastructure and $350-B on making college more affordable. Her proposals would add up to $1.8-T to deficits, according to recent independent economists’ projections. Mrs Clinton proposes tax increases for the wealthy to help fill the gap.
Donald Trump, the GOP candidate, pledged to cut taxes and spend as much as $500-M on infrastructure programs. Projections of the impact of his proposals say he would increase the national debt by roughly $5-T over 10 years. Mr. Trump says his proposals would boost economic growth, which in turn would help reduce the federal debt.
The US Treasury said receipts in FY 2016 totaled $3.27-T, or 17.8% of GDP, while spending totaled $3.85-T, or 20.9% of GDP. Receipts rose $18-B from FY 2015, while outlays jumped $166-B, the figures showed. The department cited higher spending on Social Security, Medicare, Medicaid and interest on government debt.
For September, which is the final month of the FY, the government reported a $33.4-B surplus. That was lower than the $90.9-B surplus a year earlier, in part due to calendar adjustments, according to the Treasury.
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