By Kate Davidson 

WASHINGTON -- The U.S. budget deficit surpassed $3 trillion in the 12 months through June as stimulus spending soared and tax revenue plunged, putting the federal government on pace to register the largest annual deficit as a share of the economy since World War II.

As a share of gross domestic product, the 12-month deficit came to 14% last month, compared with 10.1% in February 2010, when the U.S. was still recovering from the last recession. In June alone, the deficit widened to a monthly record of $864 billion, the Treasury Department said Monday -- nearly as much as the gap for the entire previous fiscal year, which totaled $984 billion.

The Congressional Budget Office has projected the annual deficit could total $3.7 trillion in the fiscal year that ends Sept. 30. But the gap could widen even further if Congress and the White House agree later this month on another round of emergency spending, which economists argue is vital to keep households and businesses afloat until the economy begins to recover.

Congress has authorized $3.3 trillion in new spending since March to help combat the impact of coronavirus shutdowns, including stimulus checks to American households and emergency loans and grants to struggling businesses and state and local governments. The Trump administration has also delayed personal and corporate income-tax payments until July 15 in an effort to keep more cash in Americans' wallets.

"The good news is this means we're getting fiscal relief out the door fast," said Maya MacGuineas, the president of the Committee for a Responsible Federal Budget, a deficit watchdog group. "The bad news is that we're having to borrow record amounts on top of so much unpaid-for spending and tax cuts that lawmakers approved in the past few years."

Widespread unemployment and business shutdowns have pushed down tax revenue while also boosting spending on safety net measures including unemployment insurance and nutrition assistance. A renewed surge of coronavirus cases across the South and West is forcing some states, including Texas, to reimpose social distancing measures, putting a quick economic recovery in doubt.

Federal deficits typically widen in times of recession and narrow when the economy grows. This time, the deficit was already rising in the final years of the decadelong expansion that ended in February following the Trump administration's sponsored tax cuts of 2017.

In June, spending soared to $1.1 trillion, compared with $342 billion in the same period a year earlier, the Treasury said Monday. Nearly half of that spending went to emergency small-business loans provided under the Paycheck Protection Program, aimed at helping small firms meet payroll and keep workers attached to their jobs.

Outlays for jobless benefits climbed from roughly $2 billion in June 2019 to $116 billion last month, about half of which was due to the extra $600 in weekly benefits that Congress authorized as part of the so-called Cares Act. Those enhanced payments are set to expire at the end of this month unless Congress chooses to extend them.

Meanwhile, federal revenue sank 28% to $241 billion, due in part to the administration's decision to delay tax payment deadlines. The government typically receives an influx of revenue in June when corporations and individuals make quarterly estimated tax payments. Senior Treasury officials said Monday they expect to receive a large share of that revenue in July, though declining wages and reduced economic activity have also constrained federal receipts.

For the first nine months of the fiscal year, the budget gap totaled $2.7 trillion, the Treasury said, more than triple the deficit during the same period a year earlier. Receipts fell 13% from October through June compared with a year earlier, and spending rose 49%.

Write to Kate Davidson at


(END) Dow Jones Newswires

July 13, 2020 16:32 ET (20:32 GMT)

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