WASHINGTON – The US deficit tripled to a record $ 3.1 trillion in the fiscal year that ended on September 30, as the government battled a global epidemic that plunged the US into a recession in February.
The increase in federal spending to combat coronoviruses and padded the US economy, combined with a decline in federal revenue amid widespread closures and layoffs, contributed to widespread losses. As a share of economic output, the budget gap was around 16.1% in FY 2020, the largest since 1945, when the country was financing large-scale military operations to help end World War II. .
Federal receipts totaled $ 3.4 trillion, a 1% drop from the previous year, with a much larger drop since March, when the virus began to spread across the country. With the government distributing emergency loans for small businesses, federal spending increased 47% to $ 6.5 trillion and increased unemployment benefits and incentive payments for American families.
Federal debt rose 25% to $ 21 trillion at the end of September, to $ 16.8 trillion at the beginning of fiscal year 2020. For a responsible federal budget, the committee estimated GDP as a share of more than 102%. Economy size for the first full financial year in more than 70 years.
By another measure, debt already exceeded the size of the economy during the April – June – June quarter, when it hit 105.2% from data from the Federal Reserve Bank of St. Louis.
Historically low interest rates and low inflation, however, led to a decline in the cost of servicing higher government debt. Net interest costs on the public fell 9% last year from a year earlier, the Treasury said, suggesting the government has more borrowing capacity to finance the recovery.
Research and economic data show that unprecedented relief spending — of which the $ 2.2 trillion enacted in the Cars Act in March — helped keep households and businesses operating during the early months of the recession, leading to increased income And consumer demand increased.
More than 10 million people are still out of work, however, there are signs that the pace of recovery is slowing as federal aid programs expire. Economists and policymakers, including Federal Reserve President Jerome Powell, warned that growth could decline further until Congress passes additional aid.
Republicans in Congress have emphasized another large economic relief bill, pointing to this year’s huge budget shortfall and citing federal debt as a reason to hold back on increased spending.
Treasury officials said that the budget gap up to March reflected a massive decrease during the same period of 2019. Federal spending from October to March was 6.8%, while revenue grew by 6.4%.
In contrast, from April to September, spending was almost double as it was during the same six-month period a year earlier, and receipts declined by 7.1%. Treasury officials said the deficit is due to climb 715% in the second half of the year compared to the same period of 2019.
Officials said the increase in spending could be attributed to efforts to mitigate the economic slowdown. Spending by the Small Business Administration, which operated a payroll protection program for small businesses, was $ 577 billion compared to $ 456 million a year earlier. Spending by the Department of Labor, which manages unemployment benefits, increased from $ 47.4 billion in FY 2019 to $ 367 billion in 2020.
Other safety-net programs, including Medicaid, Social Security and nutritional support, were spent, as well as new programs such as the Coronovirus Relief Fund for cities and states and a one-time $ 1,200 incentive payment to households.
During the first half of FY 2020, a stronger economy and lower unemployment increased federal receipts as corporate and personal tax revenues increased. From April to October, however, receipts declined as the virus brought economic activity to a standstill, businesses shut down and more than 20 million workers lost their jobs.
Treasury officials said personal income and payroll taxes fell by 7% in the second half of the year, while gross corporate tax receipts fell by 15%, due to measures Congress had for businesses facing revenue losses. The year was enacted to help reduce taxes, Treasury officials said.
Write Kate Davidson at [email protected]
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