Published: Sun, October 18, 2020

U.S. Budget Gap Triples to Record $3.1 Trillion on Virus Relief

U.S. Budget Gap Triples to Record $3.1 Trillion on Virus Relief

In point of fact, Trump Administration had issued a statement on Friday reporting that its budgetary deficit for the fiscal year 2020 that ended on September 30 had hit an all-time high of $3.1 trillion, more than double of the prior record of $1.4 trillion in deficits registered in the first year of Obama Administration while the United States had been spending heavily in order to back the country's banking system and to contain the fiscal damages stemmed off the Great Financial Depression of 2007-2009.

MacGuineas noted that the last time America's debt exceeded the size of the economy was at the end of World War II, and that it took years of balanced budgets to bring it down.

Also Read | Boris Johnson Threatens to Impose Restrictions on Manchester. It was also $2 trillion higher than the administration had estimated in February, before the pandemic hit.

Following the 2008 global financial crisis and economic downturn, there were fierce budget battles to reduce the size of the deficit between the Obama White House and conservatives in Congress.

The 2020 deficit, in terms of its relationship to the economy, represented 15.2 percent of total gross domestic product, the sum of all the goods and services produced by the country. That was the highest level since 1945, when the US was borrowing heavily to finance World War II.

Federal revenue from taxes, fees, and other charges totaled $3.42 trillion, a one percent decline from the 2019 fiscal year, due to the contraction of the economy as the pandemic and measures to fight its spread took hold. Congress must still pass more spending to prevent people from going hungry or losing their homes, she said.

While about half of the 22 million jobs lost in March and April have been recovered, the concern is that without more government support, those still without work will be unable to make their rent or mortgage payments and buy food. In addition to the human toll, the result would be a significant drag on USA economic growth.

But the bipartisan consensus that approved the big jump in spending earlier this year appears to have waned, and some Senate Republicans have signaled they are not comfortable with the big spending package that the White House is now negotiating with Pelosi.

"Under President Trump's leadership, the economy has begun an incredible comeback", Treasury Secretary Steven Mnuchin and White House budget chief Russell Vought said in a joint statement.

Underscoring the massive fiscal relief efforts this year, the Treasury's report showed $275 billion in outlays for federal additional unemployment compensation that included the now-expired $600 supplemental weekly jobless payments. Interest rates are low - meaning it costs less for the government to borrow money - but the ballooning deficit is already complicating policy choices as Republicans resist another large stimulus package, citing concerns about the U.S. debt burden.

The low interest rates are a key reason economists are not as concerned about the rising debt burden caused by the deficit.

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