Krishen Rangasamy, Senior Economist at National Bank Financial, notes that the latest data from the U.S. federal government confirm that the budget deficit rose for a third year in a row, reaching US$779 billion or nearly 4% of GDP in fiscal year 2018.
Key Quotes
“While expenditures grew 3.2% in 2018 (same as previous year), budget receipts rose only 0.4% or a full percentage point lower than the previous year’s increase.”
“The deceleration in receipts is attributable to tax cuts, particularly for corporations.”
“According to the non-partisan Congressional Budget Office, even assuming no recession, based on current law the U.S. budget deficit is projected to soar past 5% of GDP by 2022, a clearly unsustainable path.”
“In other words, while the U.S. economy is currently getting its temporary performance boost from stimulus, it will eventually suffer from withdrawal symptoms when Congress rediscovers an appetite for fiscal discipline.”
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