U.S. budget deficit surges for first time in five years

A slowdown in the growth of federal revenues, as well as a rise in government spending, pushed the U.S. deficit up in the 2016 financial year for the first time since 2011, reversing the trend of falling deficits as the economy recovered in recent years.

The budget shortfall widened to $587 billion in the financial year that ended Sept. 30, the Treasury Department said Friday, up 34% from the previous financial year.

That brought the deficit to 3.2% of gross domestic product, on par with the average the U.S. has run over the past 40 years and an increase from 2.5% of GDP in financial year 2015. Measured as a share of GDP, it is the first time the deficit increased since 2009.

The deficit had decreased in recent years as spending cuts and a strengthening economy had curbed federal outlays and boosted government revenue. But a growing number of Medicare, Medicaid and Social Security recipients, as well as slightly higher interest rates on publicly held debt, helped drive up total spending by 5% in 2016, while total revenues grew by just 1%. Legislation passed at the end of last year also added billions of dollars in new spending and lowered revenues by extending tax breaks.

Source: MarketWatch