The federal government’s budget deficit climbed to a record $3.28 trillion in the fiscal year that ended Sept. 30, reflecting an economy that is growing faster than expected and expanding U.S. debt that is consuming a larger share of the nation’s income.
Combined, the deficits for the past two fiscal years set records for the most red ink per year, at $1.38 trillion, and set an aggressive path toward the trillion-dollar red ink mark for 2021.
Their size belies an economy that is growing, in part because tax cuts passed last year is generating more revenue than anticipated and in part because of higher defense spending, a growing Medicaid program and an increasing share of national income going to Social Security and Medicare.
At the same time, neither Democrats nor Republicans have settled on a solution to the primary sources of debt: Social Security and Medicare.
The Treasury Department announced the deficit figure for the latest fiscal year, a record by itself. Federal spending increased $245 billion from the previous year, surpassing revenue gains of $241 billion. A recent analysis by the Federal Reserve Bank of New York projected that the budget deficit for the current fiscal year could be more than $600 billion, meaning that the government could end the year at a larger shortfall than any year since World War II.
The rising federal debt has stirred concerns among economists and could limit economic growth, saddling taxpayers with bigger bills for benefits in the future.
“It’s a bigger problem than we’ve talked about in the past,” said Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez.