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US budget deficit widens amid more spending, less revenue


The US budget deficit widened for the first time in seven years to $587 billion due to declining tax revenues and higher spending for programs including Social Security and Medicare.

The US Treasury Department said on Friday that the budget deficit jumped nearly 34 percent for fiscal year 2016.

The deficit increased to 3.2 percent of gross domestic product. It was the first time the deficit increased in relation to economic output since 2009.

In 2009, the budget deficit peaked at $1.4 trillion amid the financial crisis, when government spending soared on efforts to rescue the finance and auto sectors.

“The slowdown in tax collections suggests some cooling in labor market activity,” said Gennadiy Goldberg, a strategist at TD Securities LLC in New York City.

Experts had forecast budget shortfalls to climb unsustainably after 2018 because of the costs of an aging population, driving up spending for Medicare and Social Security.

In his budget plans this year and in past years, US President Barack Obama unsuccessfully proposed significant tax increases for the wealthiest Americans and corporations to reduce deficits, but Congress has rejected the proposals.

The Congressional Budget Office, a federal agency that provides budget and economic information to Congress, has repeatedly warned that increasing federal debt levels are unsustainable over the long term unless Congress changes current laws.

Debt levels are projected to rise under both US presidential candidates.

Republican candidate Donald Trump would cut taxes by trillions of dollars mostly for the wealthy and corporations even as he has promised to sharply reduce the federal deficit. His proposals would increase the national debt by roughly $5 trillion over 10 years.

Democratic nominee Hillary Clinton’s spending proposals would add $200 billion to $1.8 trillion to deficits, according to recent independent economists’ projections.

US Treasury Secretary Jacob Lew said in a statement that the deficit would have been smaller if tax cuts for businesses passed by Congress last year had been compensated by measures to increase government revenue.

“The Obama administration’s agenda has spurred durable economic growth and the longest streak of job growth on record, while sharply reducing the deficit to a sustainable level,” he said.

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