U.S. Budget Deficit Tripled to $3.1 Trillion as Pandemic Hit Economy

US budget deficit hits all-time high

US Deficit Balloons to More Than $3.1 Trillion

The Trump administration reported Friday that the deficit for the budget year that ended on Sept 30 was three times the size of last year's deficit of Dollars 984 billion.

This year's deficit amounted to 15.2% of the US gross domestic product, the greatest deficit as a percentage of the economy since 1945, according to the Bipartisan Policy Center's online deficit tracker.

It was also Dollars 2 trillion higher than the administration had estimated in February, before the pandemic hit.

In a statement accompanying the annual budget report, Treasury Secretary Steven Mnuchin highlighted the extraordinary level of money that has been pumped into the economy this year to combat the recession and prop up the economy.

Following the 2008 global financial crisis and economic downturn, there were fierce budget battles to reduce the size of the deficit between the Obama White House and conservatives in Congress.

Much of the increase is down to the $3 trillion in spending programs approved by Congress in the spring to stop the economy from falling deeper and deeper into recrssion and help the millions of newly unemployed.

While lawmakers and the administration agree on the need for a bill, they remain far apart on the size. From April through October, however, receipts declined as the virus brought economic activity to a standstill, businesses shut down and more than 20 million workers lost their jobs. In addition to the human toll, the result would be a significant drag on US economic growth.

"As the country continues to open up and this Administration pursues its pro-growth agenda, our economy will continue its robust recovery, sending Americans back to work and improving our fiscal picture", Russ Vought, the director of the White House Office of Management and Budget, said in a statement.

For the year, the Treasury took in $3.4 trillion - $286 billion less than had been projected - but spent $6.55 trillion, almost $1.3 trillion going for income security - cash and in-kind benefits to make sure people's basic needs are met including disability payments and unemployment compensation. Interest rates are low - meaning it costs less for the government to borrow money - but the ballooning deficit is already complicating policy choices as Republicans resist another large stimulus package, citing concerns about the United States debt burden. 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. But the national debt is now bigger than the size of the economy, and it could be nearly double GDP by 2050 as an aging population places more demands on Social Security and Medicare, according to the Congressional Budget Office. In August, the monthly federal deficit came in at $200 billion as the amount of federal spending was halved from June.

"It is hard to believe we now owe a full year's worth of output", said Maya MacGuineas, president of the committee.

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