The US budget deficit reaches $ 2.8 trillion in 2021, the second highest
The US budget deficit totaled $ 2.8 trillion for 2021, the second highest on record, but an improvement from the all-time high of $ 3.1 trillion reached in 2020. The two-year deficits reflect trillions of dollars in government spending to counter the devastating effects of the crisis. Covid pandemic19.
The Biden administration said on Friday that the deficit for the fiscal year that ended September 30 was $ 360 billion lower than in 2020, as a recovering economy boosted income, helping to offset government spending for pandemic relief efforts.
Before the deficit swelled during a two-year pandemic, the biggest deficit had been a $ 1.4 trillion shortfall in 2009. At that time, the United States was spending heavily to get the country out of a severe recession. after the 2008 financial crisis.
As a percentage of the overall economy, as measured by gross domestic product, the 2021 deficit is 12.4% of GDP, down from the 2020 deficit, which was 15% of GDP.
The 2020 deficit was the highest relative to the overall economy since World War II, when it reached 29.6% of GDP in 1943 as the United States borrowed heavily to finance the war effort. These figures remained high at 22.2% of GDP in 1944 and 21% of GDP in 1945 before starting to decline once the war was won.
For 2021, the joint Treasury and Bureau of Management and Budget report says government spending rose 4.1 percent to $ 6.8 trillion. This was offset by an 18.3% increase in government revenue to $ 4 trillion. The income gain reflects an improving economy as millions of people who lost their jobs at the start of the pandemic returned to work and corporate profits rebounded after a dreadful 2020.
âUnder President Biden’s leadership, the US economy is getting back on track and Americans are back to work,â said Treasury Secretary Janet L. Yellen and Shalanda Young, acting director of the Office of Management and Finance. budget, in a joint press release.
The non-partisan Congressional Budget Office expects the deficit to fall to $ 1.2 trillion in the current fiscal year, which began October 1, and to drop below $ 1,000 billion over three years, from 2023 to 2025, before rising above $ 1 trillion for each year until 2031.
This forecast does not include spending that will occur if Biden is able to get two measures pending by Congress: a $ 1,000 billion proposal for traditional infrastructure projects such as roads and bridges, and its plan to strengthen the social safety net and fight climate change.
The backstop measure was priced at $ 3.5 trillion, but would need to be reduced to around $ 2 trillion or less to meet the objections of moderate Democrats, including West Virginia Senator Joe Manchin III.
In their comments, Yellen and Young credited Biden’s economic policies with contributing to a lower deficit, including “Biden’s swift action to mount a landmark vaccination effort” and his success in getting Congress to approve. $ 1.9 trillion in additional spending in the stimulus bill passed in March. .
âAlthough the country’s economic recovery is stronger than that of other rich countries, it remains fragile,â Yellen said. “In order to build on the progress that has been made … Congress should adopt President Biden’s Build Back Better plan.”
Yellen and other administration officials have argued that large deficits are now an acceptable way to spur economic growth and address long-term issues facing the middle class, such as lack of child care. of children. Yellen said efforts to address these issues will increase productivity in the long run and pay off at a time when government borrowing costs are so low.
For 2021, interest on the debt totaled $ 562 billion, up $ 40 billion from the previous year. However, much of this increase is due to higher inflation, which has forced the government to pay holders of Treasury securities higher yields. Payments on aggregate debt have remained relatively stable because interest rates have remained low, even as debt levels have increased. Total public debt now represents around 100% of total GDP.
The CBO’s projections are that deficits over the next decade will add an additional $ 12.1 trillion to the national debt.
Congress this month approved a short-term increase in the debt limit to $ 28.9 trillion, which will allow Yellen to continue using extraordinary measures to avert a US default for the first time. on debt, what she warned would be catastrophic and likely push the country into another recession.
Yellen said his wiggle room would run out in December if Congress did not enact a significant increase in the borrowing limit or suspend it altogether. Congress must also pass a budget plan for this year or approve another interim spending bill by Dec. 3 to avoid a government shutdown.