US posts record $3.1T bud­get deficit be­cause of pan­demic

Baltimore Sun - - MARYLAND - By Martin Crutsinger

WASH­ING­TON — The fed­eral bud­get deficit hit an all-time high of $3.1 tril­lion in the 2020 bud­get year, more than dou­ble the pre­vi­ous record, as the coron­avirus pan­demic shrank rev­enues and sent spend­ing soar­ing.

The Trump ad­min­is­tra­tion re­ported Fri­day that the deficit for the bud­get year that ended on Sept. 30 was more than three times the size of last year’s deficit of $984 bil­lion. It was also $2 tril­lion higher than the ad­min­is­tra­tion had es­ti­mated in Fe­bru­ary, be­fore the pan­demic hit.

It was the gov­ern­ment’s largest an­nual short­fall in dol­lar terms, sur­pass­ing the pre­vi­ous record of $1.4 tril­lion set in 2009. At that time, the Obama ad­min­is­tra­tion was spend­ing heav­ily to shore up the na­tion’s bank­ing sys­tem and limit the eco­nomic dam­age from the 2008 fi­nan­cial cri­sis.

The 2020 deficit, in terms of its re­la­tion­ship to the econ­omy, rep­re­sented 15.2% of to­tal gross do­mes­tic prod­uct, the sum of all the goods and ser­vices pro­duced by the coun­try. That was the high­est level since 1945, when the U.S. was bor­row­ing heav­ily to fi­nance World War II.

The ad­min­is­tra­tion’s fi­nal ac­count­ing of the 2020 bud­get year shows that rev­enues fell 1.2% to $3.42 tril­lion, while gov­ern­ment spend­ing surged 47.3% to $6.55 tril­lion. That spend­ing re­flects the re­lief pro­grams Congress passed in the spring to sup­port the econ­omy as mil­lions of Amer­i­cans were los­ing their jobs.

Many of the ben­e­fit pro­grams ex­pired in late July or early Au­gust, and Democrats and Repub­li­cans have been un­able to agree on leg­is­la­tion to re­in­state them. Repub­li­cans have balked at the level of spend­ing sought by Democrats, who warn that with­out sig­nif­i­cant sup­port the coun­try could be fac­ing a dou­ble-dip re­ces­sion.

While about half of the 22 mil­lion jobs lost in March and April have been re­cov­ered, the con­cern is that with­out more gov­ern­ment sup­port, those still with­out work will be un­able to make their rent or mort­gage pay­ments and buy food. In ad­di­tion to the hu­man toll, the re­sult would be a sig­nif­i­cant drag on U.S. eco­nomic growth.

Pres­i­dent Don­ald Trump has said he is will­ing to com­pro­mise with Democrats on a new re­lief pack­age but Se­nate Repub­li­cans have in­di­cated they don’t sup­port the spend­ing lev­els be­ing put for­ward by Democrats.

“The ad­min­is­tra­tion re­mains fully com­mit­ted to sup­port­ing Amer­i­can work­ers, fam­i­lies and busi­nesses and to en­sur­ing that our ro­bust re­bound con­tin­ues,” Trea­sury Sec­re­tary Steven Mnuchin said in a state­ment re­leased with the bud­get re­port.

The joint re­port from Trea­sury and the Of­fice of Man­age­ment and Bud­get showed that to­tal gov­ern­ment re­ceipts of $1.61 tril­lion were $286 bil­lion lower than the ad­min­is­tra­tion had pro­jected in Fe­bru­ary. That re­flected a drop of $203 bil­lion in in­di­vid­ual in­come taxes from the Fe­bru­ary fore­cast and a de­cline of $51.8 bil­lion in cor­po­rate in­come taxes from the Fe­bru­ary pro­jec­tion.

The $6.55 tril­lion in spend­ing — $1.76 tril­lion higher than the ad­min­is­tra­tion’s Fe­bru­ary es­ti­mate — in­cludes the coron­avirus re­lief pro­grams passed by Congress, such as in­di­vid­ual eco­nomic im­pact pay­ments of $1,200, ex­panded weekly un­em­ploy­ment ben­e­fits of $600 per week and the Pay­check Pro­tec­tion Pro­gram to pro­vide sup­port to small busi­nesses.

De­spite all the bor­row­ing re­quired to fi­nance the surg­ing deficit, in­ter­est pay­ments on the debt ac­tu­ally came in $53.8 bil­lion be­low the ad­min­is­tra­tion’s Fe­bru­ary pro­jec­tion. That was due to in­ter­est rates be­ing lower than ex­pected this year be­cause of the re­ces­sion that be­gan in Fe­bru­ary.

The low in­ter­est rates are a key rea­son econ­o­mists are not as con­cerned about the ris­ing debt bur­den caused by the deficit. The fed­eral deficit is ap­proach­ing 100% of GDP and is pro­jected to top that amount in 2021.

“It’s dis­ap­point­ing to both can­di­dates for pres­i­dent propos­ing tril­lions of dol­lars in ad­di­tional debt,” said Maya MacGuineas, pres­i­dent of the Com­mit­tee for a Re­spon­si­ble Fed­eral Bud­get.

GRAEME JEN­NINGS/AP

Trea­sury Sec­re­tary Steven Mnuchin said in a re­port that the Trump ad­min­is­tra­tion “re­mains fully com­mit­ted to sup­port­ing Amer­i­can work­ers, fam­i­lies and busi­nesses.”

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