Wednesday, 03 March, 2021


Budget deficit to hit record $3.3 trillion due to virus, recession

US debt set to exceed size of its economy - first time since WWII US deficit could hit $3.3T in 2020, amplified by coronavirus relief spending: CBO
Conrad Doyle | 04 September, 2020, 12:28

The figure of $3.3 trillion is triple the size of the deficit from 2019 and more than double the amounts incurred in the wake of the Great Recession of 2008-2009.

It's set to be the highest level since the end of World War II after the government ramps up its spending to battle the coronavirus pandemic.

The swelling of the U.S. budget and deficit comes after stimulus measures of more than $2 trillion passed by Congress this year to rescue the economy from the coronavirus pandemic.

The deficit will increase to 107 per cent of gross domestic product (GDP) by 2023, "the highest in the nation's history", surpassing the previous peak in 1946 after World War II, according to the Congressional Budget Office (CBO).

These huge federal outlays have caused a surge in this year's already large deficit and federal debt.

The federal government has had to resort to enormous spending packages this year - amounting to trillions of dollars - to prop up an economy battered by the virus. This debt has accumulated and is now in excess of $20 trillion, projected to continue growing at a steady pace in the coming years. In the years before the virus, Congress also approved a handful of measures that widened the budget gap, including two bipartisan budget deals that lifted government spending above previously enacted caps and a Republican tax cut that has constrained revenues. "But the soaring debt to GDP ratio is totally unsustainable, even if interest rates remain low". "However, the deficit trends should scare any taxpayer", wrote Brian Riedl, a senior fellow at the Manhattan Institute. "At 16.0 percent of gross domestic product, the deficit in 2020 would be the largest since 1945". It is also expected to record the biggest jump in debt-to-GDP this year among advanced economies, including Germany, France, Italy and the United Kingdom.

Some experts say the nation's debt load is unsustainable, though most say the USA should spend what it takes to thwart the coronavirus and end the economic crisis stemming from the pandemic.

"Congress must spend what it takes to end the pandemic and keep vulnerable families and businesses afloat". Some Republicans have argued against any additional relief measures at all. Democrats have pushed for a broad-based, $3.5 trillion relief package, while the White House and Senate GOP have sought to cap the bill at $1 trillion.

The Democratic-controlled House passed a Dollars 3.5 trillion measure in May, though House Speaker Nancy Pelosi, D-Calif., says she is willing to cut that figure to USD 2.2 trillion.

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