US budget deficit climbs to record $2.81tn

14 August, 2020 12:00 AM printer

NEW YORK: The US budget deficit climbed to $2.81 trillion in the first 10 months of the budget year, exceeding any on record, the Treasury Department said Wednesday.

The nation’s budgetary shortfall is expected to eventually reach levels for the fiscal year that ends September 30 more than double the largest annual deficit on record, report agencies.

The federal government rang up a $63 billion deficit in July, the department reported.

That’s a relatively modest amount compared to red ink that spilled in the spring months when the government tried to revive an economy that all but ground to a halt due to the coronavirus outbreak.

Last month’s deficit was sharply lower than June’s $864 billion, in part because the government collected a record amount tax revenue in July $563 billion after extending the filing deadline to July 15.

That extension allowed Americans more time to sort through the economic havoc wrought by the pandemic.

Outlays to the Small Business Administration, which doled out $511 billion as part of the Paycheck Protection Program in June, fell to about $26 billion in July.

So far this budget year, government receipts total $2.82 trillion, off just 1 per cent from the same period last year, Treasury officials said, crediting the income replacement provided by various government aid packages. In other words, unemployment benefits and other aid are still taxable.

Outlays so far this budget year total $5.63 trillion, a 50 per cent increase over the $3.73 trillion at this point in 2019, with the vast majority of the extra spending related to fortifying the country’s economy in the wake of the coronavirus pandemic.

Congress has already passed rescue packages totaling nearly $3 trillion this year, but Democrats and Republicans remain far apart on another relief bill, just as an expanded unemployment benefit of $600 per week expired on July 31.

President Donald Trump issued a series of presidential directives last weekend to prolong the extended unemployment benefits at $400 a week, with 25 per cent to be paid for by the states.

But it’s unclear how much of an economic boost the extension would provide, given the economic uncertainty and funding that could run dry after five weeks.

Democrats in the House passed another bill with $3 trillion in aid, but the Republican-led Senate is pushing for a package closer to $1 trillion and did not bring the House bill up for a vote before going on August recess.

The Congressional Budget Office has forecast a $3.7 trillion deficit for this fiscal year as the country fell into a deep recession in February, ending a record expansion of nearly 11 years.

The Trump administration is predicting that the economy will bounce back in second half of 2020, but many private forecasters are concerned that consumers will dial back spending as infections surge in states like Florida.