US budget deficit jumps above $1 trillion for the first time in more than 6 years
- The gap between federal expenditures and receipts grew 34% from a year earlier to $134 billion in October.
- Lawmakers typically have more tools to reduce the national debt when the economy is in a solid place.
- But recent legislation, including sweeping tax cuts that took effect last year, has continued to take it the opposite direction.
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The US budget deficit continued to swell at the start of the fiscal year, as government spending outpaced revenue despite solid economic growth.
The gap between federal expenditures and receipts grew 34% from a year earlier to $134 billion in October, the Treasury Department said in its monthly budget statement Wednesday. That brought the 12-month deficit above $1 trillion for the first time in more than six years.
Receipts last month were down about 3% from the same month a year ago to $246 billion, partly due to calendar quirks that affected the time of payments. Outlays rose 8% to $380 billion.
In congressional testimony hours earlier, Federal Reserve Chairman Jerome Powell warned that such a pace was unsustainable and would undermine the country's ability to fight a recession.
"Even with lower rates and even with decent growth, there is still going to be a need to reduce these deficits," Powell told the Joint Economic Committee. "Frankly, if we don't do it, what happens is our children will wind up spending their tax dollars on interest rather than things they really need."
Lawmakers typically have more tools to reduce the national debt when the economy is in a solid place. But recent legislation, including sweeping tax cuts that took effect last year, has continued to take it the opposite direction.
In June, a Republican congressman who helped craft the $1.5 trillion package walked back the longstanding claim that a tax cut would pay for itself. The GOP had argued that lower taxes would lift the economy enough to make up for the loss in federal revenue.
A bipartisan budget agreement President Donald Trump signed into law in August lifted the debt ceiling and increased spending by about $320 billion. That could amount to a $1.7 trillion increase in projected debt levels over the next decade, according to estimates from the Committee for a Responsible Federal Budget.
With growth set to slow in the coming months, deficit projections are poised to increase further.