US budget deficit jumps above $1 trillion for first time since 2012

source
Getty Images / Tasos Katopodis
  • The US budget deficit continued to swell at the end of 2019 as the government spent more than it collected in revenue despite a solid economy.
  • The calendar-year deficit was $1.02 trillion for the first time since 2012 in the aftermath of the global financial crisis.
  • Budget hawks have lost influence in Washington over the years, pushing the nation further into the red.
  • Visit Business Insider’s homepage here.

The US budget deficit continued to swell at the end of 2019 as the government spent more than it collected in revenue despite a solid economy.

The gap between federal expenditures and receipts grew 12% to $357 billion in the first quarter of the fiscal 2020 year, the Treasury Department said Monday in its monthly budget statement. The deficit was $319 billion during the same period last year amid the implementation of a Republican tax cut package and a bipartisan deal to boost spending.

The increase in December brought the year-over-year federal deficit to above $1 trillion for the third month in a row. The calendar-year deficit was $1.02 trillion for the first time since 2012 when lawmakers continued to pursue stimulus measures in the aftermath of the global financial crisis.

With a historically low unemployment rate and solid growth, policymakers have more tools to tackle the deficit. But budget hawks have lost influence in Washington over the years, pushing the nation further into the red.

Federal Reserve Chairman Jay Powell warned in November that the deficit could tie the hands of policymakers in the event of a recession, adding that historically low interest rates would not change the need to reduce it.

“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,” he said.

As a candidate in 2016, President Donald Trump promised to eliminate the deficit within eight years. But the nonpartisan Congressional Budget Office projects that the annual deficit will remain above $1 trillion for the next decade.