By John McCormick 

The U.S. federal budget deficit widened 454% in March from a year earlier, as the government issued a third round of stimulus checks to help Americans ride out the economic fallout from the Covid-19 pandemic.

The budget gap rose to $660 billion in March, the Treasury Department said Monday, from $119 billion in the same month last year. Revenue rose 13% to $268 billion in March, while spending increased 161% to $927 billion.

The government's spending surge has provided some cushion to the economy from the pandemic's devastation, but it has also sent deficits soaring to levels not seen since the end of World War II as a proportion of the economy. Weaker tax revenue has contributed to the shortfall.

For the first six months of fiscal 2021, the deficit widened 130% to a record $1.7 trillion. Outlays from October through March rose to $3.4 trillion, an increase of 45%. Receipts rose 6% to $1.7 trillion.

Budget deficits are likely to remain at the center of debates over the Biden administration's next major legislative effort: a roughly $2.3 trillion proposal that aims to bolster long-term economic growth through investments in infrastructure, clean energy and education.

Higher costs for unemployment benefits, nutrition assistance, healthcare and assistance to small businesses pushed government spending higher, while stronger corporate tax collection and remittances from the Federal Reserve lifted revenue, Treasury officials said.

The budget gap is on track to widen further, following enactment of a $1.9 trillion aid package passed last month with only Democratic votes that provided another round of stimulus checks for many Americans, extended enhanced jobless benefits and provided billions of dollars for vaccine distribution and school reopenings.

The Congressional Budget Office projects the deficit for the fiscal year ending Sept. 30 will total $2.3 trillion, almost $1 trillion less than last year's record gap but more than officials projected in September.

Even before the latest aid package was passed, the CBO projected that federal debt would equal 102% of gross domestic product in 2021. It has exceeded that level only twice before in U.S. history, in 1945 and 1946, following a surge in federal spending as a result of World War II.

Treasury officials said Fed remittances sent to the government have increased 33% so far this fiscal year compared with last year, as lower interest rates have held down the central bank's costs and its growing portfolio of securities has yielded greater income.

Write to John McCormick at mccormick.john@wsj.com

(END) Dow Jones Newswires

April 12, 2021 14:39 ET (18:39 GMT)

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