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US Deficit Balloons to More Than $3.1 Trillion

US Deficit Balloons to More Than $3.1 Trillion”

The data are a stark reflection of the staggering blow that the coronavirus pandemic has dealt to the US economy.

At the beginning of the year, the US Treasury forecast a $1 trillion deficit, but when coronavirus lockdowns began to be enforced in March, it was acknowledged that the figure was no longer realistic. For 2020, the government spent $6.552 trillion, up from $4.447 trillion one year ago, according to the data released jointly by the White House and the Treasury Department. The largest source of tax revenue is individual income taxes, which collected $1.6 trillion in 2020. 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.

While the central bank cut the benchmark interest rate to near zero in March and expects to keep borrowing costs very low likely for years to come, lawmakers remain deadlocked over additional fiscal aid ahead of the November 3 election.

The deficit is the amount of spending the government does beyond total tax revenue. Given low interest rates and the severe nature of a health crisis that has stalled so many parts of the economy, he said the deficit was not an immediate priority. It now stands at around $21 trillion.

The deficit was more than double the previous record of $ 1.416 trillion in fiscal year 2009, when the United States was facing a hard financial crisis. That is less than half 2020′s tally.

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Even the most ardent deficit hawks agreed that the virus, which shut down large swaths of the economy and tossed millions out of work, necessitated a huge fiscal response.

Factors behind the increase include shrinking tax revenues and massive spending to prop up the economy, which has been hit by the coronavirus pandemic. That's because the gap between federal spending and collected tax revenue grew to unprecedented levels. The monthly deficit jumped to $738 billion for April alone, which was a record until the monthly deficit for June came in at $864 billion. Russell T. Vought, director of the Office of Management and Budget, said that as the recovery continued, the fiscal picture would improve as companies hired back workers and people began spending more money.

Monthly deficits have since subsided somewhat, both as the pace of new government spending slowed and the USA economy began to bounce back and the unemployment rate fell, resulting in greater tax revenues.

Despite the increase of the deficit, economists and lawmakers from both sides of the political aisle have clamored for more government spending. At the same time, economists on Wall Street and elsewhere in the federal government emphasized the importance of new aid as the pace of recovery slows.

Spending rose 47 percent to $6.5 trillion, largely due to the four pandemic relief bills passed by Congress in March that authorized an aggregate of $2.4 trillion in spending.



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