US budget deficit hits $3.1 trillion

Clay Curtis
October 18, 2020

The Treasury said the budget deficit in September, the last month of the fiscal year, was $ 125 billion, compared to a $ 83 billion surplus in September 2019.

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.

Even before the pandemic, debt totals had already risen significantly during the Trump administration, despite a campaign promise by Donald Trump to eliminate government debt in eight years.

The administration's final accounting of the 2020 budget year shows that revenues fell by 1.2 percent to $3.42 trillion, while government spending surged 47.3 percent to $6.55 trillion.

Treasury Secretary Steven Mnuchin added that the CARES Act and other stimulus measures paved the way for "a strong economic recovery". At that time, the Obama administration was spending heavily to shore up the nation's banking system and limit the economic damage from the 2008 financial crisis. Congress must still pass more spending to prevent people from going hungry or losing their homes, she said. As a share of economic output, the budget gap in fiscal year 2020 hit roughly 16.1%, the largest since 1945, when the country was financing massive military operations to help end World War II.

While about half of the 22 million jobs lost in March and April have been recovered, the concern is that without more government support, those still without work will be unable to make their rent or mortgage payments and buy food.

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But the bipartisan consensus that approved the big jump in spending earlier this year appears to have waned, and some Senate Republicans have signaled they are not comfortable with the big spending package that the White House is now negotiating with Pelosi. In addition to the human toll, the result would be a significant drag on USA economic growth.

A joint statement, issued by the Treasury Department and the White House Office of Management and Budget, emphasized a "spectacular return" of economic activities as businesses reopened during the summer months. Advertisement Receipts reached $3.4 trillion, reflecting a drop in tax income from the year-ago period as Americans struggled through the once-in-a-century pandemic. That was due to interest rates being lower than expected this year because of the recession that began in February.

But with Election Day approaching, Republican lawmakers have shown little appetite for more spending, despite the fact that millions remain unemployed and previous aid has largely dried up.

The government traditionally runs a deficit and finances it by issuing debt - now relatively affordable given low interest rates. Nor do larger budget deficits or a rising national debt tend to push up interest rates, as decades of rising debt and falling rates indicate. In August, the monthly federal deficit came in at $200 billion as the amount of federal spending was halved from June.

"It's disappointing to both candidates for president proposing trillions of dollars in additional debt", said Maya MacGuineas, president of the Committee for a Responsible Federal Budget.

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