The government's deficit spending boosted the country's long-term debt figure to more than $21 trillion, forcing the government to pay an extra $65 billion past year in interest on money the government has had to borrow to run its programs.
President Donald Trump hails the tax cuts as a boon to the economy, but corporate tax receipts dropped sharply and America's growing debt burden to finance the deficit became increasingly costly, the Treasury Department said.
"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 in a statement. Trump frequently criticized his Democratic predecessor Barack Obama for running up the deficit, and in 2012 recommended banning lawmakers from reelection if Congress couldn't balance the budget.
The only other period when the federal government has run deficits above $1 trillion was for four years from 2009 through 2011. By contrast, in 2012, when the deficit topped $1 trillion the USA was still in the midst of digging itself out of a recession, and spending a lot to do so.
The $779 billion deficit for fiscal year 2018 was up 17 percent from the $666 billion deficit recorded in fiscal year 2017. In March, Trump signed a $1.3 trillion spending bill into law.
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Treasury Secretary Steve Mnuchin suggested in a statement that the underlying source of the widening deficit was growth in government spending, rather than the tax cuts. That's mostly due to the massive corporate tax cut that slashed rates from 35 percent to 21 percent for top incomes, choking revenue for spending, which climbed 3 percent.
According to the Congressional Budget Office, current policies have the United States on course for a $2 trillion deficit before the end of the next decade.
However, administration officials argue the tax cuts will actually lead to huge increases in tax revenue as the economy grows.
"The president is very much aware of the realities presented by our national debt", said White House budget director Mick Mulvaney. And the administration sharply increased military spending in the past year.
"What's going on is revenues are not rising when they otherwise would be", said Marc Goldwein, senior vice president of the Committee for a Responsible Federal Budget. That increases the government's ability to spend while reducing the demand for social services.