The fiscal year that started on Oct 1, 2018, is now in its final month, and yet according to the US Treasury, in the first 11 months of the fiscal year, the US Treasury has already accumulated a more than $1 trillion budget deficit.
According to the latest budget data, In August, receipts rose 4% y/y to $228.0b in Aug, which however were dwarfed by $428.3 billion in outlays (a 1.1% drop Y/Y). The result was that the August monthly deficit was $200.3 billion, in line with expectations, if fractionally smaller than the $214.1 billion deficit posted in August 2018.
The biggest source of income, at $106 billion was income tax, with social insurance second at $96 billion. On the outlays side, the government spent the most money on entitlements such as Social Security ($88BN) and Medicare ($85BN). It may come as a surprise to some that National Defense was only third at $64BN.
However, more concerning is that on a YTD basis, i.e., the first 11 months of the year, the deficit surged 19% to at $1067.2BN, up 19% compared to $898.1BN last year, with YTD receipts in 2019 up 3.5%, while outlays rose double that, or 7.0%. The August deficit surged despite the gentle nudge from customs duties, which jumped to $64 billion in the fiscal year-to-date from $36.7 billion a year earlier, reflecting the Trump administration’s tariffs on Chinese imports, steel and other goods. Even still, income from duties represents a small share of overall federal revenue.
This means that for the first time since 2011, the US budget deficit will surpass $1 trillion at some point during the fiscal year.
It's not the end of the world yet though, as it’s likely the year-end deficit could narrow from a tax revenue bump. As the chart above shows, September, the last month of the fiscal year, typically produces a surplus because quarterly tax payments are due.
Then again, in August, the CBO projected a full 2019 deficit of $960BN. Assuming a September surplus of $72.5BN, which is the average of the last seven years, the full-year deficit would be $994.7BN, the most in seven years and more than double (127%) the deficit in FY 2015, according to Jeoff Hall.