Democratic candidates seeking to challenge Trump in 2020 are pushing plans to widen access to health care and education that could cost trillions of dollars. And yields on U.S. Treasuries have fallen sharply this year to the lowest level since 2016 amid a weaker growth outlook as well as investors seeking better returns than even lower-yielding bonds from overseas.
The deficit may have exceeded $1 trillion had it not been for the trade war with China, where Trump has escalated levies over the past year. The customs-duties revenue represented a 71% increase from 2018, as American companies paid more at the border for Chinese imports, steel and other goods. While the countries came to a preliminary agreement that’s delayed at least one planned increase in levies, current tariffs aren’t being rolled back yet.
Government outlays have provided a sizable boost to U.S. GDP amid a slowdown in business investment. Federal spending rose at an annualized pace of more than 5% in the first half of the calendar year, more than double growth in the economy as a whole, according to the Commerce Department. That was helped particularly by military spending.
The tax cuts have also been credited with helping juice economic growth last year. Yet the effects of the reductions have since faded.
Even without the tax cuts and higher defense spending, outlays are increasing at a relatively fast clip. Mandatory allocations, which include Medicare and social security payments, are growing amid an aging population and with one of the world’s least efficient health-care systems. Interest payments are also adding up, now comprising about 8.4% of total outlays.
--With assistance from Saleha Mohsin and Kristy Scheuble.
This article was provided by Bloomberg News.