President Donald Trump waves as first lady Melania Trump looks on after he spoke to Air Force personnel during an event on Sept. 15, 2017 at Joint Base Andrews in Maryland. Higher spending on military programs was one of the big drivers of increased outlays in fiscal 2019.
The numbers: The U.S. government ran a budget deficit of just under $1 trillion — $984 billion — in the fiscal year that ended in September. It was the largest shortfall since 2012, and was 26% more than the fiscal 2018 deficit of $779 billion. `
As a percentage of gross domestic product, the deficit was 4.6%, up from 3.8% in fiscal 2018.
What happened: The government spent about $4.4 trillion in the budget year that ran from October through September. Outlays for fiscal 2019 were up a record 8% over the prior fiscal year.
Social Security, Medicare and the military were among the major drivers of increased spending. Outlays on Social Security rose by 6% to $1.1 trillion, while spending on Medicare climbed by 10% to $783 billion. An increase in the number of beneficiaries is partly responsible for higher spending in both programs.
Defense spending increased by 9% to $654 billion. On the flipside, spending for the Department of Homeland Security fell 18%. Outlays for disaster relief were unusually high at the start of fiscal 2018, as the Congressional Budget Office has noted.
Interest on the public debt rose 10%.
Receipts totaled $3.5 trillion for the year, up a record 4%. Individual withheld and payroll taxes together rose to $2.5 trillion, an increase of 3%. More money also came in from corporate taxes: they rose by 5% to $277 billion.
The trade war between President Donald Trump and China also had an effect on revenues, with customs duties increasing by 70%. Trump recently called off an increase in tariffs scheduled for Oct. 15 as talks between Washington and Beijing continue.
The annual figure includes a September budget surplus of $83 billion. The government typically runs a surplus for September, as estimated individual and corporate taxes pour in.
The big picture: The jump in the deficit over last year’s is a taste of things to come, the Congressional Budget Office has said. In August, the nonpartisan agency estimated a budget deal reached between Trump and Congress would help push the shortfall over $1 trillion in fiscal 2020. The deficit will exceed $1 trillion each year over the subsequent decade, the agency projected.
Meanwhile, as the 2020 presidential campaign heats up, pledges by the candidates could add more to the red ink. In the wake of his $1.5 trillion tax-cut package passed in 2017, Trump has promised more tax cuts and Democrats seeking the White House have proposed programs like Medicare for All, which would cost the government trillions of dollars.
The CBO has warned that rising debt is a risk to the economy. Still, increasing red ink hasn’t scared investors away from the financial markets. The yield on the 10-year Treasury note TMUBMUSD10Y, +1.80% has fallen to 1.8% from as high as 3.23% in November. The S&P 500 index SPX, +0.34% is up about 20% for the year.