Jan 13, 2020

Deficit balloons to $356.6 billion in first quarter of fiscal year

Photo: Bloomberg Creative Photos/Getty Images

The U.S. budget deficit hit $356.6 billion in the first quarter of fiscal year 2020, up 11.8% compared to the same period the previous year, Bloomberg reports.

Why it matters: The deficit, which President Trump pledged in 2016 to eliminate within eight years, is on pace to exceed $1 trillion by the end of 2020. The U.S. has not seen $1 trillion annual deficits since the three years that followed the 2008 financial crisis, per the New York Times.

Details: The federal government spent the most on national defense, Medicare and social security, all of which rose from the prior fiscal year. Spending for Medicare and social security is expected to continue rising as the aging population grows.

  • Increases in those categories obscured higher receipts from corporate income taxes, which grew 23% to $65 billion, and individual taxes, which were up 3% at $385 billion.
  • Tariffs implemented by President Trump on China and other countries also brought in $21 billion from U.S. importers, up almost 20% from the same period last year, per Bloomberg.

Go deeper ... Chart: How the U.S. budget deficit has fluctuated since the 1980s

Go deeper

First trillion-dollar deficit not caused by the Great Recession

Data: Congressional Budget Office; Chart: Axios Visuals

The Congressional Budget Office expects the U.S. budget deficit will top $1 trillion in fiscal year 2020, the first trillion-dollar deficit in history not caused by the Great Recession.

Why it matters: The deficit is rising at a time of exceptionally low unemployment and solid economic growth, rather than during a crisis, which is typically when spending elevates.

Go deeperArrowJan 29, 2020

Trump's budget proposal relies on highly unlikely expectations

Reproduced from WSJ.com; Chart: Axios Visuals

President Trump is expected to double down on big spending and tax cuts when he releases his budget proposal for fiscal year 2021 later today.

The big picture: The budget proposes increases in defense spending and other categories and also assumes the annual budget deficit will fall from more than $1 trillion in 2020 to around $200 billion, largely as a result of increased U.S. growth.

Despite massive cuts, deficits flow through Trump's second term

Trump addresses the crowd during the Opportunity Now summit at Central Piedmont Community College on Feb. 7 in Charlotte, N.C. Photo: Sean Rayford/Getty Images

President Trump's 2021 budget proposes $4.6 trillion in deficit reduction, but it would take 15 years to balance, according to a source familiar with the budget.

The big picture: The budget will project deficits until 2035 and rather than proposing a new round of tax cuts, it assumes the extension of Trump's 2017 tax bill through the next term.