US budget deficit jumps in January, putting it on track to hit $1 trillion for first time since 2012

• The US budget deficit swelled at the beginning of 2020 even as the economy continued to grow at a steady pace.
• The gap between what the government spent and collected rose 25% to $389 billion in the first four months of the fiscal 2020 year.
• The deficit is projected to surpass $1 trillion this year for the first time since 2012, according to the nonpartisan Congressional Budget Office.
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The US budget deficit swelled at the beginning of 2020 even as the economy continued to grow at a steady pace.

The gap between what the government spent and collected rose 25% to $389 billion in the first four months of the fiscal 2020 year, the Treasury Department said in its monthly budget statement Wednesday. Some February payments fell on a non-business day, pushing the $33 billion deficit wider in January.

A historically low unemployment rate has helped push up tax receipts in recent months, but the government has steadily increased expenditures on healthcare and the military. Unadjusted receipts last month rose 10% to $372 billion, while unadjusted outlays were up 22% to $405 billion.

The deficit is projected to surpass $1 trillion this year for the first time since 2012, according to the nonpartisan Congressional Budget Office. Borrowing has risen steadily despite a humming economy, raising alarm among experts because deficits tend to fall during periods of growth.

Tax revenues fell sharply last year following the implementation of a Republican-led overhaul, which lowered rates for corporations and high earners. Congress also passed a bipartisan spending package that was expected to add at least $500 billion to the deficit over a decade.

Borrowing is likely to continue to climb dramatically over the next decade, according to the CBO, hitting an unprecedented $31 trillion by 2030.

On Tuesday, Federal Reserve Chairman Jay Powell warned Congress that the deficit is at an unsustainable level and that it would leave the country with fewer tools to deal with a downturn.

"Putting the federal budget on a sustainable path when the economy is strong would help ensure that policymakers have the space to use fiscal policy to assist in stabilizing the economy during a downturn," Powell told the House Financial Services Committee in semiannual testimony.