By Kate Davidson
WASHINGTON -- Government tax receipts rose again in June but not enough to offset higher federal spending, which pushed the U.S. budget gap to $747 billion for the first nine months of the fiscal year.
The Treasury Department said Thursday the deficit grew 23% from October through June, compared with the same period a year earlier. The government collected $2.6 trillion in receipts, a 3% increase, reflecting a substantial increase last month in corporate tax revenue, which had been running below Congressional Budget Office projections so far this year. Higher spending on the military and interest on the debt drove federal outlays up 7%, to $3.3 trillion since the start of the fiscal year, the Treasury said. Both revenues and outlays set a record for this point in the fiscal year.
A strong economy typically leads to narrower deficits, as rising household income and corporate profits help boost tax collections, while spending on safety-net programs such as unemployment insurance tends to decline.
The U.S. economy has been growing for 10 years as of this month, the longest economic expansion on record. Yet annual U.S. deficits are on track to exceed $1 trillion over the next few years, due in part to the 2017 tax law, which constrained federal revenue collection last year, and a 2018 budget deal that busted spending caps enacted in 2011.
U.S. employers added 224,000 jobs in June, a record 105th straight month of job creation, and wages rose 3.1% from a year earlier. That wage gain is near the best in a decade, though it is down from a recent peak of 3.4% in February.
U.S. economic output grew at a 3.1% seasonally adjusted annual rate in the first quarter, but forecasters predict that momentum slowed in the second quarter, amid heightened trade tensions, slower global growth and tepid business investment.
In the 12 months that ended in June, the deficit totaled $919 billion, a 22.6% increase from the same period a year earlier. As a share of gross domestic product, the year-over-year deficit totaled 4.4%, much higher than the previous 12 months.
Corporate tax revenue rebounded in June -- a month with significant estimated tax payments -- after a period when analysts were unsure why it was running below the CBO's projections. The U.S. collected $51.3 billion in corporate taxes in June, up 35% from the $38 billion it collected in June 2018. Overall, corporate tax revenue is now up 1.6% for the fiscal year to date. As of the end of May, it had been down 9% compared with the prior fiscal year.
More broadly, annual deficits are projected to more than double as a share of the economy over the coming decades, as a wave of retiring baby boomers pushes up federal spending on retirement and health-care benefits.
The latest figures come as congressional leaders and Trump administration officials are negotiating a new deal to set overall spending levels for the next fiscal year. Administration officials have cited rising deficits in their push to hold spending at current levels, though that proposal faces increasing resistance from some Senate Republicans who want to increase military spending, and runs counter to their own desire to extend certain tax cuts.
The pace of revenue collection and the resulting budget gaps are also key to discussions over raising the federal borrowing limit.
The Treasury has warned lawmakers it could run out of room to keep paying the government's bills -- and risk defaulting on U.S. debt -- by late summer unless Congress raises the debt ceiling. A new estimate from the Bipartisan Policy Center released Monday predicts the X-date could arrive in early September.
The latest estimate puts pressure on Congress and the White House to reach an agreement on raising the limit before the House and Senate leave for their August recess. Lawmakers are not scheduled to return to Washington until Sept. 9.
"There have been some outside numbers talking about the debt ceiling and that is something we're having discussions about, updating the numbers and potentially the need to do something before everybody leaves," Treasury Secretary Steven Mnuchin said Wednesday following a meeting with administration officials and Senate Republicans.
House Speaker Nancy Pelosi (D., Calif.) maintained at a press conference Thursday that the debt-ceiling vote should be paired with a broader agreement on raising the spending caps. The current budget agreement is set to expire on Oct. 1.
Mrs. Pelosi said she was monitoring the arrival of the potential X-date.
"We'll just see about the timing. We're having our back and forth conversations. We understand the value of that. We also understand how important it is for us to lift the caps so that we can meet the needs of the American people and we're having those conversations at the same time," she said.
--Richard Rubin and Andrew Duerhen contributed to this article.
Write to Kate Davidson at firstname.lastname@example.org
(END) Dow Jones Newswires
July 11, 2019 14:36 ET (18:36 GMT)
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