The Congressional Budget Office (CBO) estimated Friday that the federal deficit for Fiscal 2016 totaled $588 billion, an increase of $149 billion over the previous year. The deficit for Fiscal 2016, which ended Sept. 30, equaled an estimated 3.2 percent of GDP, up from 2.5 percent in 2015.
This was the first increase compared to the nation’s output since 2009, and is unfortunately an omen of more rising deficits in the years ahead.
About $41 billion of the 2016 deficit increase is attributed to a shift in the timing of some payments that the government ordinarily would have made in Fiscal 2017, which began on a weekend. But even taking this into account, as CBO notes, the 2016 deficit was still considerably higher than the previous year’s deficit.
Not only did the 2016 deficit turn higher, but it did so because of something CBO has long warned about: Spending on the major entitlement programs outpacing the growth in federal revenue.
The 2016 spending increases were largely on Social Security, Medicare, Medicaid and interest payments on the debt. Taking the shift in timing payments into account, those four items amounted to $100 billion, or nearly 79 percent of the $127 billion in spending increases for the year.
This demonstrates the importance of structural budget reforms that take into account the aging of the population, rising health care costs and the persistent gap between spending and revenue.
Monthly Budget Review for September (CBO)