US budget deficit seen reaching $3 trillion in 2021

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The U.S. budget deficit will reach $3 trillion for 2021, the second-largest shortfall since 1945 due to the economic effects of the coronavirus disease 2019 (Covid-19), the Congressional Budget Office (CBO) said Thursday.

The deficit is projected to be about 13.4 percent of the gross domestic product, second only to last year’s $3.1-trillion deficits, which was 15.2 percent of the GDP. The 2021 deficit is also about triple that of 2019, which saw a shortfall of about$900 billion.

The CBO blamed increased federal stimulus spending for this year’s imbalance, including the $1.9 trillion package signed by President Joe Biden in March. Once the legislation expires, the deficit should drop to $1.2 trillion in 2022 and $800 billion in 2023, according to the report.

“The economic disruption caused by the 2020-2021 coronavirus pandemic and the legislation enacted in response continue to weigh on the deficit (which was already large by historical standards before the pandemic),” the CBO report said.

The U.S. government is expected to spend some $6.8 trillion in 2021, while collecting about $3.8 trillion in revenue. The total federal debt is expected to be $23 trillion or 103% at the end of 2021, up from $21 trillion at the end of 2020.

The CBO projected the deficit will decline to about 3 percent of GDP in 2023 and 2024, but it will increase to 5.5 percent in 2031. The total federal debt is expected to fall to below 100 percent of the GDP in 2023 and 2025 before increasing to 106 percent in 2031.

 


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