According to the latest estimate by the Congressional Budget Office (CBO), the U.S. government ran a budget deficit just shy of $1 trillion in the recently closed fiscal year. The CBO report is unsettling as many are calling this “unsustainable.”
In terms of the specifics, the estimate for this year’s deficit came in at $984 billion, roughly $200 billion more than last year’s deficit, which was $779 billion. This increase comes despite very low unemployment and continuing economic growth.
Previous Treasury estimates projected the deficit for the year to surpass $1 trillion.
The $984 billion deficit is 4.7% of gross domestic product (GDP), the highest level since 2012.
Note that the annual deficit has only ever exceeded $1 trillion four times, in the periods immediately following the global financial crisis.
The CBO has warned that the nation’s current $22 trillion debt is on an unsustainable path. Higher levels of debt increase borrowing costs, making it harder for the government to battle economic downturns and increase the share of future spending devoted to paying off interest costs. Many mainstream economists agree.
The CBO also notes that deficits have grown faster than the size of the economy for four years in a row.
Watch for when the Treasury Department releases final deficit figures mid-month.