Budget deficit hits record $ 3 trillion amid virus relief
WASHINGTON — New, eyepopping federal budget figures released Thursday show an enormous $ 3.1 trillion deficit in the justcompleted fiscal year, a record swelled by coronavirus relief spending that pushed the tally of red ink to three times that of last year.
The Congressional Budget Office released the unofficial 2020 figures Thursday, saying the deficit equaled 15% of the U. S. economy, a huge gap that was the largest since the government undertook massive borrowing to finance the final year of World War II.
The government spent $ 6.6 trillion last year and borrowed 48 cents of every dollar it spent, CBO said. The numbers amount to a 47% increase in spending, led by $ 578 billion for the Paycheck Protection Program for smaller businesses, and a $ 443 billion increase in unemployment benefits over the past six months alone.
The massive figures were expected but still stunning, more than double the previous deficit record of $ 1.4 trillion that was registered during former President Barack Obama’s first year in office during the Great Recession in 2009.
Revenues also contributed to the bleak fiscal picture, falling $ 44 billion to $ 3.4 trillion, as income tax receipts dropped almost 16% as the jobless rate spiked. Corporate income taxes dropped by 21%, even as Social Security and Medicare payroll taxes climbed 5%.
Economists say the most significant measure of government deficits is to compare them to the gross domestic product. By that score, the flood of red ink in 2020 still blew past Obama’s 2009 record, in which the deficit almost hit 10% of GDP.
The CBO estimate is preliminary, based on daily Treasury reports, but is likely to match the official numbers due from Treasury and the White House budget office later this month.
The figures come as Washington has been debating another round of COVID19 relief, spending that Federal Reserve Board Chairman Jay Powell says is needed to ease the chances of a doubledip recession and a higher jobless rate. But talks have broken down and fears are rising that more fiscal stimulus will have to wait until next year.
House Speaker Nancy Pelosi said Thursday she’s “at the table” and ready to negotiate a coronavirus aid package even after President Trump halted talks abruptly. His decision earlier this week sent the jittery economy reeling and left his GOP allies scrambling as millions of Americans go without jobless assistance, hopedfor business support or expanded testing protocols weeks before Election Day.
Pelosi said she told Trump’s chief negotiator, Treasury Secretary Steven Mnuchin, she is willing to consider a measure to prop up the airline industry, which is facing widespread layoffs. But that aid, she said, must go alongside broader legislation that includes the kind of COVID testing, tracing and health practices that Democrats say are needed as part of a national strategy to “crush the virus.”
Democrats have made it clear they will not do a piecemeal approach until the Trump administration signs off on a broader, comprehensive plan they are proposing for virus testing, tracing and other actions to stop its spread. They have scaled back a $ 3 trillion measure to a $ 2.2 trillion proposal. The White House presented a $ 1.6 trillion counter offer. Talks were ongoing when Trump shut them down.
The COVIDrelated spike in the deficit obscures a smaller, steady rise in the deficit under Trump’s watch. Trump in 2017 engineered a large tax cut whose 10year cost has been matched by pandemic relief efforts over the past six months alone.
In August, CBO issued a 10year estimate predicting the deficit would decline to $ 1.8 trillion in the 2021 budget year that began Oct. 1 and would register $ 13 trillion over the coming decade. It would average 5% of GDP over that time, a level that many economists fear could lead to higher interest rates and a stagnating economy.