The federal government incurred the largest monthly budget deficit in history in June, as spending on programs to combat the coronavirus recession exploded as millions of job losses cut tax revenue.
WASHINGTON – The federal government incurred the largest monthly budget deficit in history in June as spending on programs to combat the coronavirus recession exploded as millions of job losses cut tax revenue.
The Treasury Department reported Monday that the deficit reached $ 864 billion last month, an amount of red ink that exceeds most annual deficits in the nation’s history and is above the previous monthly deficit of $ 738. billion in April. That amount was also tied to the trillions of dollars Congress has provided to cushion the impact of widespread closures that occurred in an effort to limit the spread of the viral pandemic.
During the first nine months of this budget year, which began on October 1, the deficit totaled $ 2.74 trillion, also a record for that period. That puts the country on track to hit the year-long $ 3.7 trillion deficit that has been forecast by the Congressional Budget Office.
That total would exceed the previous annual record of $ 1.4 trillion set in 2009 when the government was spending heavily to pull the country out of the recession caused by the 2008 financial crisis.
The June deficit was higher due to spending on various government aid programs, such as an additional $ 600 per week in expanded unemployment benefits and a Paycheck Protection Program that supported companies to keep workers on their jobs. payrolls.
The report showed that the cost of the Paycheck Protection Program in June was $ 511 billion. That reflected a charge to the government for all bank loans made under the program, even though the government will not actually have to pay funds until banks determine whether companies meet the criteria for loans to be forgiven. Those requirements include spending at least 60% of the loan amount on workers’ payments and the other 40% going toward overhead costs, like rent and utilities.
Another reason for the June deficit increase was the government’s decision to delay tax payments this year until July 15. That decision means that quarterly payments made by individual taxpayers and corporations will not be due until July 15 of this year instead of June.
So far this budget year, revenues total $ 2.26 trillion, 13.4% less than in the same period last year, while spending totals $ 5 trillion, 49.1% more than a year ago.
CBO’s estimate of a $ 3.7 trillion deficit for this year could increase depending on the course of the economy. The country fell into a deep recession in February, ending a record expansion of nearly 11 years. The Trump administration predicts the economy will grow again in the second half of this year, but many private forecasters are concerned that a resurgence of virus cases could make consumers too afraid to resume spending, boosting the 70s. % of the economy.
Congress, which has already approved more than $ 3 trillion in a series of rescue packages, will debate another support effort when it returns from the June 20 recess. Democrats are pushing for an extension of expanded unemployment benefits that will soon run out.
Nancy Vanden Houten, a senior economist at Oxford Economics, said she hoped lawmakers would end up committing to a new economic support package that would fall somewhere between a $ 3.5 trillion bill passed by the House of Representatives but not being adopted by the Senate and what’s shaping it. to an opening offer by Senate Republicans for a package of about $ 1.5 trillion.
“The risk is that the deficit will be larger due to additional stimulus, but, given the congressional schedule, the impact of the next package will likely be biased to fiscal year 2021, which begins October 1,” he said.