The Treasury Department and the Office of Management and Budget (OMB) announced that the final FY2016 federal budget deficit was $587 billion, up $148 billion from FY2015 ($439 billion). The administration had estimated in the annual Mid-Session Review in July that the FY2016 deficit would be $616 billion.
This is the first increase in the deficit in five years.
The increase in the deficit came as higher government expenditures (+$166 billion) more than offset a small increase in revenues (+$18 billion). The administration does point out that part of the increase in outlays was due to the timing of benefit payments. Because October 1 fell on a weekend, benefit payments were made in September.
Data on government expenditures and receipts and the deficit are reported in the Monthly Statement of Receipts and Outlays of the United States Government (MTS) prepared by the Treasury Department.
When measured as a percent of Gross Domestic Product (GDP), the FY2016 deficit increased to 3.2 percent (from 2,5 percent in FY2015), about the average for the past 40 years. During the period FY2009 to FY2012 the deficit’s share of GDP averaged about 8.5 percent.
The modest revenue growth (+$18 billion) in 2016 was led by a 4.7 percent increase in social insurance and retirement receipts (+$49.8 billion). Miscellaneous receipts increased by 5.8 percent (+$8.4 billion), estate and gift taxes rose by 11 percent increase (+$2.1 billion), and individual income tax receipts increased by a very small 0.3 percent (+$5.3 billion). However, these increases were partially offset by an almost 13 percent decline in corporate income tax receipts (-$44.2 billion), a 3.3 percent decrease in excise taxes (-$3.2 billion), and a 0.6 percent drop in customs duties (-$0.2 billion).
Spending on health programs and Medicare increased by $77.5 billion in FY2016 (+7.5 percent). Social Security outlays rose $28.3 billion (+3.2 percent), and spending for veterans benefits and services rose by $14,8 billion (9.3 percent). Outlays for net interest payments increased by $17.4 billion (+7.8 percent). Spending on national defense increased by only $3.9 billion in FY2016 (0.7 percent).
Looking ahead, OMB projected in its Mid-Session Review that the FY2017 deficit would be $441 billion. However, both OMB and the Congressional Budget Office expect deficits to rise again by 2020.