Reuters Donald Trump with PayPal co-founder Peter Thiel, Apple Inc CEO Tim Cook and Oracle CEO Safra Catz in 2016. Corporate taxes paid by companies including Apple have dropped sharply after the tax-cut law Trump signed.
The numbers: The U.S. budget deficit in August was $211 billion, nearly double the gap during the year-ago month, the Congressional Budget Office estimated late Monday.
Adjusted for shifts in the timing of payments that otherwise would have occurred on a weekend of holiday, the deficit would have grown by 19%. The Treasury Department will report final official numbers on Thursday, and they are usually very similar to the CBO’s.
What happened: Excluding timing shifts, outlays grew 8%, as the net interest on public debt jumped 25%, defense spending jumped 10%, outlays for Social Security grew 5%, and outlays for Medicare benefits rose 7%. There also was an Agriculture Department downward adjustment made in the year-ago August. One boost to government finances was an increase in spectrum payments to the Federal Communications Commission.
Receipts fell by 3%, with corporate taxes dropping by $5 billion, while revenue from income and payroll taxes rose marginally.
The big picture: The budget deficit is widening in a big way. In the first 11 months of the fiscal year, the deficit was $895 billion, which is $222 billion more than the previous year. Outlays have climbed 7% while revenue rose 1%.
Corporate taxes have plummeted by 30% this fiscal year, both because of the lower rate as well as the expanded ability to immediately deduct the full value of equipment purchases. Individual income and payroll taxes have climbed 4%, as increasing wages — mostly, due to more people having jobs — offset a lower withholding rate.
Spending on Social Security and Medicare have climbed 4% as more baby boomers retire, outlays on net interest on the debt have jumped 19% in part due to a higher rate of inflation triggering more payments to inflation-protected securities holders, and defense spending has jumped 6%.
Kevin Hassett, the White House chief economic adviser, was careful in a briefing with reporters on Monday to say the corporate tax cuts — but not the whole package — would pay for themselves with higher growth.
“I think that the notion that the corporate tax side has about paid for itself is clearly in the data,” he said. “On the individual side, there was about a trillion-dollar cost. About $700 billion of that was a refundable child credit that got expanded at the last minute to get the votes they needed to pass it.”
(The Joint Committee on Taxation estimates the modification to the child tax credit to cost $573 billion over a decade, and that the individual side cost $1.13 trillion in total.)
Other administration officials have made more sweeping claims that the entire tax cut would pay for itself, including Treasury Sec. Steven Mnuchin and former National Economic Council Director Gary Cohn.
Market reaction: There’s little evidence the worsening fiscal picture is scaring the bond market too dramatically. The yield on the benchmark 10-year Treasury TMUBMUSD10Y, +1.50% has climbed about a half percentage point this year but still remains below 3%.
