U.S. budget deficit surpasses $1 trillion as government spending climbs

/ CBS/AP

Budget deficit will top $1 trillion in 2020

The U.S. government's budget deficit for the 2019 fiscal year surpassed the $1 trillion benchmark in August, the highest level in seven years, the Treasury Department said Thursday.

The government budget deficit climbed $169 billion to $1.07 trillion in the first 11 months of this budget year, as government spending this year outpaced tax collections in areas such as Social Security, Medicare, defense and interest payments on the national debt. With just one month left in the budget year, the deficit is up 18.8% over the year-ago period, according to the Treasury Department.

Budget experts projected a surplus for September, which would push the total 2019 deficit down slightly below the $1 trillion mark for the fiscal 2019 year. The Congressional Budget Office is forecasting a deficit this year of $960 billion, compared to $779 billion last year.

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Longer term, the CBO in August forecast that the annual deficit would again top $1 trillion in 2020 and remain above that threshold over the next decade.

Higher government spending

The government has recorded trillion-dollar-plus deficits in only one other period — between 2009 through 2012, when federal spending shot up to cope with the worst financial crisis since the 1930s.

The higher deficits currently reflect higher government spending, reflecting two budget agreements in 2018 and this year between the Trump administration and Congress that added billions of dollars in extra spending for the military and domestic programs.

In addition, Social Security and Medicare payments are surging as millions of baby boomers retire. Added to the increased spending is the impact of the $1.5 trillion tax cut President Donald Trump pushed through Congress in 2017, reducing individual and corporate tax rates.

For this year, revenues are up 3.4%, but spending is up by 7 percent, nearly double the increase in revenues. Individual tax revenues have risen by 2% in the first 11 months of this year compared to the same period in 2018 while corporate tax revenues are down 2%.

Bucking this slow growth are tariffs which are up $28 billion or 73% over last year, reflecting the higher tariffs Trump has imposed on China and other nations as part of his get-tough trade battles.

On the spending side, the government so far this year has spent $379.1 billion on interest payments on the debt, up $47 billion from a year ago, reflecting the growing size of the national debt.

Commenting on the new report, Michael Peterson, head of the Peterson Foundation, said, "Absent more responsible budgets, the deficit and interest costs will continue to grow rapidly, diminishing America's future."

First published on September 12, 2019 / 5:17 PM

© 2019 CBS Interactive Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report.

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