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
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
"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
Political support for taming deficits has faded in Washington in
recent years, as persistent global demand for U.S. Treasury assets
has kept borrowing costs near historic lows. Despite the surge in
government borrowing, net interest costs fell 11% in the first nine
months of the fiscal year, the Treasury said Monday.
The dramatic rise in red ink has rankled some Republicans and
White House officials, who have argued against another sweeping
economic relief package and called instead for aid that is more
narrowly targeted at the hardest hit-industries, in part due to
concerns about the deficit.
Democrats and many economists, however, have said policy makers
must tackle the more pressing problem -- controlling the virus and
supporting American households and businesses -- and worry about
deficits later, especially when the cost to borrow is so low. The
yield on the benchmark 10-year Treasury note was around 0.622% late
Monday, down from more than 2% a year ago.
The CBO estimated last week that the jobless rate will end the
year at 10.5%, compared with a 50-year low of about 3.5 percent
before the recession. While the economy is expected to grow in the
second half this year, output in the fourth quarter of 2020 will be
5.9% lower than a year earlier, the agency said.
The economy showed signs of reviving in May and June as parts of
the country reopened. The number of Americans receiving
unemployment benefits fell by nearly 700,000 to 18.1 million for
the week ended June 27, the lowest reading since the week ended
April 18. Employers added a combined 7.5 million jobs in May and
June after shedding 21 million jobs in March and April.
Whether that recent rate of job creation and relatively lower
pace of layoffs, can continue is in doubt because coronavirus
infections are causing state authorities to reconsider reopening
plans and creating renewed uncertainty for many businesses and
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
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
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 firstname.lastname@example.org
(END) Dow Jones Newswires
July 13, 2020 17:13 ET (21:13 GMT)
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