The federal budget deficit is projected to total $ 2.3 trillion in fiscal year 2021, down from last year, but well ahead of anything the United States had seen before the Covid-19 pandemic, the report said. Congressional Budget Office on Thursday.
That total does not include the $ 1.9 trillion in relief spending that President Joe Biden proposed, because the final size of the package has not been determined.
Although less than the $ 3.13 trillion deficit in fiscal 2020, red ink this year will still be the second largest in the country’s history in terms of total dollars or as a proportion of the $ 20 U.S. economy, 9 trillion.
While the previous deficit was 14.9% of GDP, the 2021 level is projected at 10.3%.
The size of the budget deficit in dollars is $ 448 billion, or 25%, larger than the previous forecast from CBO, a non-partisan agency that provides budget analysis to Congress.
Not surprisingly, the CBO said that the inflated level comes from the additional spending that Congress has instituted to combat the effects of the pandemic. After passing the $ 2.2 trillion CARES Act in March, Congress in December approved another $ 900 billion in financing.
However, the report notes that large deficits are somehow offset by faster economic growth.
“These deficits, which were already projected to be large by historical standards before the start of the 2020-2021 coronavirus pandemic, have increased significantly as a result of the economic disruption caused by the pandemic and the enactment of legislation in response,” said the CBO said in report.
Deficits also continue to raise the national debt.
Currently, the public share of the national debt of US $ 27.9 trillion reaches US $ 21.8 trillion, or just above 100% of GDP. The CBO predicts that this number will continue to grow, reaching US $ 35.3 trillion or 107% of GDP in 2031. This would be the largest debt-to-GDP ratio in US history.
The average annual deficit is estimated at $ 1.2 trillion by 2031, which will exceed the 50-year average of 3.3% of GDP.
The CBO expects GDP to grow 3.7% in 2021, below the Federal Reserve’s median forecast of 4.2%. However, this is an improvement over the 3.5% decline throughout 2020.