WASHINGTON — The U.S. federal government is sliding deeper into the red.
The country’s deficit rose to $779 billion in fiscal 2018, its highest level in six years as Republican-led tax cuts caused the government to borrow more heavily. That represents a jump of 17 percent over last year, the largest figure since 2012, when the U.S. was spending to stimulate its economy.
The higher deficit spending is expected to add downward pressure on future defense budgets. On Oct. 16, U.S. President Donald Trump called for government spending to be cut 5 percent across every federal department, and while his prescription for future defense spending was confused, he seemed to suggest a cut from $717 billion in FY19 to $700 billion in FY20.
The U.S. Treasury announced Oct. 15 the deficit rose $113 billion over the previous year as government spending outpaced revenues. Receipts were generally flat in FY18, while spending increased 3.2 percent as Congress gave more funds for military and domestic programs.
“President Trump prioritized making a significant investment in America’s military after years of reductions in military spending undermined our preparedness and national security,” Treasury Secretary Steven Mnuchin said.
The Defense Department’s portion of outlays totaled $600.7 billion, which was $8.1 billion or 1.4 percent higher than estimated. The difference was attributed to higher-than-expected disbursements for aircraft and other Air Force procurement contracts ($5 billion), outlays for Army military personnel ($2.5 billion), disbursements for revolving and management funds ($1.5 billion), and disbursements for research, development, test and evaluation contracts ($1.2 billion).
These differences were partially offset by lower-than-expected outlays for operation and maintenance contracts ($1.1 billion) and for military construction contracts ($0.8 billion), as well as higher-than-anticipated receipts.
Revenues generally tumbled after December when Trump signed into law $1.5 trillion of tax cuts over the next decade. The tax cuts have caused economic growth to accelerate this year, with Federal Reserve officials anticipating gains of 3.1 percent. But the Trump administration initially promised that the tax cuts would pay for themselves through stronger growth — and there is no sign so far of that happening.
Mnuchin suggested in a statement that the underlying source of the widening deficit was growth in government spending, rather than the tax cuts.
“Going forward the president’s economic policies that have stimulated strong economic growth, combined with proposals to cut wasteful spending, will lead America toward a sustainable financial path,” Mnuchin said.
But Maya MacGuineas, president of the Committee for a Responsible Federal Budget, said in a commentary published by The Hill that it’s long been clear tax cuts would not pay for themselves. Meanwhile, Social Security and major government trust funds are headed toward insolvency.
“Perhaps as dangerous as the policy choices, though, are the stories lawmakers are telling themselves about the situation,” MacGuineas said. “First, tax cuts were never going to pay for themselves. Grow the economy? Yes. Pay for themselves? Not even close.”
The Associated Press contributed to this report.
Joe Gould is the Congress and industry reporter at Defense News, covering defense budget and policy matters on Capitol Hill as well as industry news.