WASHINGTON – The U.S. budget deficit grew to $ 2.71 trillion through August, on track to be the second largest deficit in history due to trillions of dollars in COVID aid.
In its monthly budget report, the Treasury Department said on Monday that the deficit for the first 11 months of this budget year is 9.9% lower than the imbalance during the same period last year.
For the entire budget year, which ends Sept. 30, the Congressional Budget Office projects a deficit of $ 3 trillion, which would be just below the record deficit of $ 3.13 trillion set by ‘last year.
Last year’s deficit was more than double the previous record of $ 1.4 trillion set in 2009 under the Obama administration, when the government was spending heavily to fight the deep recession after the 2008 financial crisis.
For the first 11 months of this fiscal year, government revenues totaled $ 3.39 trillion. This marks a healthy 17.7% increase from a year ago, fueled by the economic rebound from the COVID-induced recession that allowed millions of people to return to work, increasing individual incomes and profits for workers. companies.
Government spending grew 4% slower to $ 6.21 trillion. Spending this year and last reflects the trillions of dollars spent to prevent the economy from sliding into a prolonged recession by providing individual support payments, improved unemployment benefits and billions of dollars in loans. -subsidies to small businesses.
For August, the deficit stood at $ 170.6 billion, down 14.7% from August 2020, when it reached $ 200 billion. The difference is the result of the gradual cessation of a number of aid programs put in place since March 2020.
The August deficit report is not expected to significantly alter predictions about when Treasury Secretary Janet Yellen will run out of wiggle room to prevent the government from defaulting for the first time in the year. story.
In a letter to the leaders of Congress Last week, Yellen said she plans to exhaust available “extraordinary measures” used to prevent the United States from reaching the government’s borrowing limit next month. The measures mainly involve draining federal employee pension funds to make room for more borrowing until Congress increases the current limit of $ 2.84 trillion or suspends the limit.
The debt limit came back into effect on August 1 after being suspended for two years. The need to deal with the debt limit is entangled in three other pending major spending decisions: the need to pass an interim finance bill once the new fiscal year begins on October 1 and action on two massive infrastructure bills going through Congress.
Nancy Vanden Houten, an economist at Oxford Economics, said she projected next year’s deficit to decline to $ 1.43 trillion, which would be less than half the size of the deficits seen over the years. 2020 and 2021 budgets.
She said the improvement would come from the end of COVID support programs that would offset increased spending on two infrastructure bills President Joe Biden is seeking to pass Congress in the coming weeks.
“We expect that the expenses associated with the new legislation will gradually increase and be mainly offset by increases in income and reductions in spending,” she said.
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