By Kate Davidson 

WASHINGTON -- The government budget gap was 12% bigger in the first two months of the fiscal year, as higher spending on the military and health care pushed up government outlays.

The government ran a $343 billion deficit in the first two months of fiscal year 2020, which began Oct. 1, the Treasury Department said Wednesday. Federal spending rose 7%, to $814 billion, in October and November, outpacing federal tax receipts, which increased 3%, to $471 billion.

The budget gap over the past 12 months exceeded $1 trillion for the second month in a row, totaling 4.8% as a share of gross domestic product, a broad measure of economic output.

Part of the increase in the deficit in the first two months can be attributed to calendar quirks, which made the gap appear larger. If not for a shift in the timing of certain payments, the deficit would have been 7% bigger than last year, and receipts and outlays would have each risen by 6%.

A Treasury official attributed the higher outlays early in the fiscal year to rising costs of Medicare and Medicaid -- which rose 7% and 9% respectively -- as well as higher Social Security spending due to rising enrollment and cost of living adjustments. Meanwhile, lower interest rates this year have held down the cost of interest payments on government debt, the official said.

Customs duties, or tariffs, have increased 26% so far this fiscal year, and tax withholding is up 4%, the Treasury said.

A strong economy typically leads to narrower deficits, as rising household income and corporate profits help boost tax collections, while spending on safety-net programs such as unemployment insurance tends to decline. Instead, U.S. deficits have been rising in recent years, prompting the Treasury to ramp up borrowing.

The government said it expected to borrow more than $1 trillion for the second year in a row in 2019.

More broadly, annual deficits are projected to more than double as a share of the economy over the coming decades, as a wave of retiring baby boomers pushes up federal spending on retirement and health-care benefits.

Write to Kate Davidson at kate.davidson@wsj.com

(END) Dow Jones Newswires

December 11, 2019 14:19 ET (19:19 GMT)