WASHINGTON – The federal budget deficit grew 17 percent in fiscal year 2018 with the gap between federal income and spending expanding to $779 billion, the Office of Management and Budget and the Treasury Department report.
Higher defense spending, plus increases in Medicaid, Social Security and disaster relief were contributing factors.
"President Trump prioritized making a significant investment in America's military after years of reductions in military spending undermined our preparedness and national security," Treasury Secretary Steven Mnuchin said in a statement.
The deficit is growing even as the government collected a record level of income tax this year. The Department of Treasury says American workers paid $1.6 trillion in taxes – the most in US history.
The Trump administration has been trying to remedy the situation with tax cuts, but critics argue that approach will only make the problem worse.
"Undertaking permanent fiscal stimulus [through tax cuts] at this stage of the economic expansion is contrary to all sound tenets of economic policy," The Wall Street Journal quoted Jason Furman, former chairman of the Council of Economic Advisers under the Obama administration.
However, administration officials argue the tax cuts will actually lead to huge increases in tax revenue as the economy grows.
"Going forward, the president's economic policies that have stimulated strong economic growth, combined with proposals to cut wasteful spending, will lead America toward a sustainable financial path," Secretary Mnuchin said.
Meanwhile, OMG Director Mick Mulvaney says the new report should serve as a wake-up call to Capitol Hill.
"This fiscal picture is a blunt warning to Congress of the dire consequences of irresponsible and unnecessary spending," Mulvaney said in a statement.
"Going forward, President Trump and this administration will continue to work with Congress to make the difficult choices needed to bring fiscal restraint, which, when matched with increasing revenue, will reduce our deficit," he said.