Record US$3.3 trillion figure comes after explosion in federal spending amid coronavirus pandemic. Federal debt held by public will hit 98 per cent of GDP by end of financial year
This story is published in a content partnership with POLITICO. It was originally reported by Kellie Mejdrich on politico.com
on September 2, 2020.
The US government budget deficit will triple this year to US$3.3 trillion, soaring to the largest percentage of gross domestic product since 1945, the Congressional Budget Office projected on Wednesday.
As a result, federal debt held by the public will hit 98 per cent of GDP in fiscal 2020, which ends on September 30, and exceed the size of the economy by 2021, the CBO reported in updated projections.
The deficit-to-GDP ratio of 16 per cent in 2020 comes after an explosion in federal spending amid the coronavirus pandemic designed to bolster the economy and shield millions of American workers from financial ruin. The bleak figures also reflect a massive drop-off in economic growth this year as a consequence of the virus.
The rising debt levels also mean that trust funds for federal entitlement programmes are expected to run dry faster than previously estimated.
If Congress does not change spending or policy to fix the imbalance, three trust funds will be depleted within the next 10 years, the CBO said: the Highway Trust Fund in fiscal 2021; the Medicare Hospital Insurance Trust Fund in fiscal 2024; and the Social Security Disability Trust fund in fiscal 2026.
The deficit estimate increased US$2.2 trillion from March, driven by economic relief legislation, the CBO said.
Still, with ultra-low interest rates on US government debt and no sign yet that aggressive spending has stoked inflation, many economists argue that federal debt levels are of less concern for the moment.
on September 2, 2020.
The US government budget deficit will triple this year to US$3.3 trillion, soaring to the largest percentage of gross domestic product since 1945, the Congressional Budget Office projected on Wednesday.
As a result, federal debt held by the public will hit 98 per cent of GDP in fiscal 2020, which ends on September 30, and exceed the size of the economy by 2021, the CBO reported in updated projections.
The deficit-to-GDP ratio of 16 per cent in 2020 comes after an explosion in federal spending amid the coronavirus pandemic designed to bolster the economy and shield millions of American workers from financial ruin. The bleak figures also reflect a massive drop-off in economic growth this year as a consequence of the virus.
The rising debt levels also mean that trust funds for federal entitlement programmes are expected to run dry faster than previously estimated.
If Congress does not change spending or policy to fix the imbalance, three trust funds will be depleted within the next 10 years, the CBO said: the Highway Trust Fund in fiscal 2021; the Medicare Hospital Insurance Trust Fund in fiscal 2024; and the Social Security Disability Trust fund in fiscal 2026.
The deficit estimate increased US$2.2 trillion from March, driven by economic relief legislation, the CBO said.
Still, with ultra-low interest rates on US government debt and no sign yet that aggressive spending has stoked inflation, many economists argue that federal debt levels are of less concern for the moment.