Fiscal 2019 Deficit Through July

Below is a chart comparing the current year U.S. budget deficit with the prior fiscal year. Through the end of July, the federal government has overspent by $867 billion.

The current year-to-date deficit is $182 billion more than the deficit through July 2018. It’s also more than the deficit for all of Fiscal 2018 (the fiscal year ends on September 30). Based on the current spending, the annual deficit for Fiscal 2019 will exceed $1 trillion.

The last time the deficit exceeded $1 trillion, the U.S. was spending to stave off another Great Depression. At present, the economy is not in recession. Instead, the stock market is reaching all-time record levels, unemployment is at records lows and the economy is booming. Despite these prosperous times, Congress and the President continue to overspend with little regard for the future, or how the U.S. national debt is going to be repaid.

Are you concerned with a $1 trillion annual deficit in the midst of economic prosperity?

Fiscal 2019 Deficit Through April

The chart below tracks the monthly deficit or surplus of the U.S. government for the current fiscal year, in comparison to the prior year. The deficit through April (the first seven month of the fiscal year) was $531 billion. This is $145 billion more than the first seven months of Fiscal 2018.

According to a recent CBO projection, the U.S. deficit will be near $900 billion by September 30. This is expected to be $100 billion more than the Fiscal 2018 deficit, but less than the initial estimate of $1 trillion. In order to meet this projection, the deficit for the next five months will need to be nearly the same as May through September of 2018.

How likely do you think the federal deficit for the next five months will be equal to the deficit for the same period last year?

Fiscal 2019 Deficit Through October

The U.S. government started a new fiscal year on October 1, 2018, which will end on September 30, 2019. The federal government overspent by $98 billion in October. The chart below compares the monthly deficit or surplus for the current fiscal year with Fiscal 2018.

Congress has yet to agree on a budget for Fiscal 2019, nor have they passed all of the required spending bills. To keep the government operating until after the November election, Congress passed a Continuing Resolution (CR), which temporarily funded the government until December. The CR effectively puts the government on autopilot until Congress can pass the necessary fiscal legislation.

The preliminary estimate is the U.S. government will overspend by nearly $1 trillion this year. The deficit may be higher or lower, depending upon the final agreement reached by Congress and the President. Since fiscal issues were not a major campaign issue during the 2018 election cycle, don’t expect Congress to make any significant changes that will reduce the deficit.

How concerned are you that the U.S. government will overspend by nearly $1 trillion this year?

Fiscal 2018 Deficit through December

Below is a graph comparing the monthly deficit for Fiscal 2018 with Fiscal 2017.

The preliminary December deficit was $26 billion, which is $1 billion less than December 2017. The cumulative deficit for the first three months is $20 billion more than the prior year. Revenues for the first quarter have risen by 4%, but expenditures have risen by 5%. 

Since Congress has yet to finalize the spending for Fiscal 2018. The final appropriations bills could reduce spending and shrink the projected deficit, or they could increase spending and enlarge the deficit.

Do you expect the current year deficit will be larger or smaller than last year?

A New Year - A New Budget

If you're like a lot of people, you create a budget at the beginning of the new year. Budgets are a great way to manage your finances. Putting your income and expenses down on paper can help you better understand how much margin you have in your spending, or if it looks like you're going to come up short. Budgets may not account for every expense or event that may happen, but they are effective financial tools to help you understand your financial obligations, establish priorities and manage your cash flow.

The U.S. government also has an annual budget. However, its fiscal year starts on October 1 rather than January 1. The budget resolution is passed by Congress but doesn't require the signature of the President. The federal budget establishes the guidelines, and the specific spending is determined by separate appropriations bills. 

Although Congress has a budget and spending process, it rarely follows it anymore. Congress didn't pass the Fiscal 2018 budget until November, and none of the appropriations bill have been passed, even though we're more than three months into the current fiscal year. Congress has passed short-term continuing resolutions to keep the U.S. government from shutting down. 

Budgets can be useful financial tools, if used effectively. Individually, budgets should be more than an exercise you conduct at the beginning of the year. You should periodically review and update your budget to check your progress. For the federal government, it should pass a budget and the related appropriations bills before the start of the fiscal year, rather than after several months have passed.

How effective would you rate the federal government's budget process?

U.S. Budget Deficit through November

Below is a graph tracking the monthly federal deficit for Fiscal 2018, which runs from October 2017 through September 2018.

The federal government overspent by $198 billion in October and November. This compares to the $181 billion deficit through November 2017. Revenues and expenditures both grew at 6% over last year. Since annual expenditures exceed revenues by $600 billion, the cumulative deficit is greater than last year.

Congress has yet to pass the required appropriations for Fiscal 2018, and current spending is determined by temporary funding measures. The current shot-term Continuing Resolution ends January 19, 2018.

Do you think the spending measures approved by Congress will increase or decrease the budget deficit for this year?

The Fiscal 2017 Deficit

The U.S. government's fiscal year ended on September 30, and a new year began on October 1. The Congressional Budget Office (CBO) estimates the Fiscal 2017 deficit was $668 billion, which is $81 billion more than Fiscal 2016. A year ago, the CBO was projecting the Fiscal 2017 deficit would be less than Fiscal 2016, not $81 billion more. The chart below compares the monthly deficit or surplus to the prior year.

Total government revenues increased by 1%, but expenditures increased by nearly 3%. As a percentage of Gross Domestic Product (GDP), the Fiscal 2017 deficit was approximately 3.5% of GDP, up from 3.2% in Fiscal 2016. It's also the second consecutive year the deficit rose as a percentage of GDP, which indicates government spending is growing faster than the U.S. economy.

We're already two weeks into the new fiscal year, and Congress is still a long ways from deciding on government spending for the coming year. To prevent a government shutdown, Congress approved a Continuing Resolution, that effectively continues all Fiscal 2017 spending until mid-December. Since it's unlikely Congress will enact the necessary monetary legislation until close to the deadline, spending for nearly one-fourth of the year will be equal to or greater than last year. Unless Congress enacts spending cuts (which it has been unable to do so far), they have created a situation where the Fiscal 2018 deficit will likely be higher than the most recent $668 billion deficit.

Are you concerned the federal government spent $668 billion more than it received during the last year?

The Budget Process-As It's Supposed to Work

Congress has established a process for how the budget process is supposed to work. However, this process has not been followed for years.

Below is a quick synopsis of the process.

• The President delivers his proposed budget between the last Monday in January and the first Monday in February.
• The Congressional Budget Office (CBO) scores the President's proposed, which estimates the projected revenues and expenditures and the CBO results are compared to the estimates prepared by the Office of Management and Budget (OMB)
• The House and Senate pass a Budget Resolution outlining the revenue and spending priorities of Congress. As a Congressional Resolution,  the President does not sign the Budget Resolution.
• Congress passes 12 separate Appropriations Bills authorizing the specific spending by the various Departments and Agencies of the U.S. government.

The last time Congress passed all 12 appropriations bills on time was in 1994. For the last 20+ years, they have consistently used omnibus spending bills and continuing resolutions, where they combine more than one appropriations bills (or all of them), into one piece of must-pass legislation, to fund the government. 

Is it possible there is a correlation between the departure from the established budget process and the increase in annual budget deficits?

The next post will provide a status overview of the Fiscal 2017 budget and appropriations bills.