October 2017 Federal Deficit

America’s fiscal year 2018 is underway, and the Department of Treasury celebrated the New Year with a larger deficit than in October 2016 (the beginning of last fiscal year).  Our nation’s budget shortfall was $63.2 billion, an increase of 37.9 percent compared to a year ago.  Although receipts grew versus the same period a year ago, spending accelerated more.

Growing personal income taxes buttressed the nation’s receipts, but firms paid more as well.  Helped by the economic growth during the past year, Americans paid 5.1 percent more taxes, totaling $127.8 billion in October.  Corporations upped their payments to the Federal Government by $1.5 billion compared to a year earlier.

Many of the normal culprits contributed to the increased outlays.  Defense spending rose 14.6 percent in the past year to $59.6 billion.  Incredibly, interest spending was nearly half of what was spent on defense; net interest expenses increased 21.6 percent from a year earlier and accounted for $28.5 billion of Federal Government spending in October 2017 alone.  Finally, Social Security outlays increased 3.0 percent to $80.0 billion versus the same period a year ago.

This indicator seems to be growing in popularity.  It is mentioned more frequently on the nightly news as our leaders in Washington D.C. wrangle with variations on new tax policies.  By traditional standards, America’s fiscal outlook is not optimal.  Our nation’s debt-to-GDP ratio is elevated during a relatively strong economic period, and interest costs are consuming more of the budget each year.  One cannot help but wonder how the beltway will react during the next economic contraction since they have found it difficult to make much progress in addressing America’s deficit/debt during the current expansion.  This indicator’s popularity is increasing for the wrong reasons.