February US deficit at record $234 billion

The US monthly budget deficit was at a record high in February.

US dollar after record February US deficit Source: Bloomberg

The US Treasury department reported that the nation’s budget deficit increased 39% in February to $234 billion. That deficit is the largest monthly deficit in the history of the US.

Why is the US budget deficit so high?

The US national monthly deficit is a record, just as the trade deficit is also at an all-time high. The US deficit grew because of increased spending on transportation and agriculture programs from the 2018 budget. Spending totaled $401 billion, jumping from $371 billion in 2018. The government collected $167 billion in revenue.

Two major factors contributed to the deficit, according to economic experts. The corporate tax cuts passed in 2017 was projected to reduce revenue by $1.5 trillion, but be contrasted by economic growth. The tax reduction for corporations led to less corporate taxes collected and economic growth hasn’t been enough to make up for the deficit. The deficit also increased after a growth in defense spending that Congress approved in 2018.

The Treasury Department also noted that the US individual tax season also impacted the nation’s deficit, as the US government collected $15 billion less in tax revenue.

‘February has been a deficit month 53 times out of 65 fiscal years as February is the first full month of the annual individual tax filing season and generally contains elevated individual tax refund levels, while also not containing a major corporate or individual tax due date,’ stated the Treasury Department.

Trump Administration’s response

The Trump Administration has touted a strong economy despite rising deficits. Treasury Secretary, Steve Mnuchin, said that a growing gross domestic product (GDP) will change the trajectory of the nation’s deficit.

‘An extra one percent of GDP growth per year means trillions of dollars of additional economic activity and more revenue to the government,’ said Mnuchin.

Even though the Trump Administration said that more revenue will be added to the US economy, the White House predicted that the deficit will remain over $1 trillion for the next fiscal year.


The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer.

European Central Bank meeting

Learn about how the ECB meeting affects interest rates and price stability ahead of the next announcement on 10 April 2019.

  • How might the next meeting affect the markets?
  • What are the key rate decisions to watch?
  • Why is the Governing Council announcement important for traders?

Live prices on most popular markets

  • Forex
  • Shares
  • Indices
Bid
Offer
Updated
Change
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Bid
Offer
Updated
Change
Bid
Offer
Updated
Change
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.