The U.S. budget deficit hit $3 trillion in the 12 months through June, putting the financial gap on pace to be the largest annual deficit since World War II, The Wall Street Journal reports.
As coronavirus spending increased and tax revenue plummeted, the deficit for the month of June hit a monthly record of $864 billion, according to the Treasury Department. The entire deficit for the previous fiscal year totaled $984 billion.
The Congressional Budget Office estimates the annual deficit could total $3.7 trillion in the fiscal year that ends Sept. 30. That prediction could total even more if lawmakers approve another relief package. Some have expressed concern over pumping out more money when the deficit is so high.
Since March, Congress approved $3.3 trillion in new spending to help Americans feeling a financial crunch due to the virus lockdowns. In addition, the Trump administration delayed personal and corporate income tax payments until July 15 so that Americans could keep more cash on hand.
“The good news is this means we’re getting fiscal relief out the door fast,” Maya MacGuineas, the president of the Committee for a Responsible Federal Budget, a deficit watchdog group, told the Journal. “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.”
But the cost to borrow money is low. The Treasury said Monday that net interest costs fell 11% in the first nine months of the fiscal year. The yield on the benchmark 10-year Treasury note was about 0.622% late Monday. Last year, it was about 2%.
The economy showed signs of improvement in May and June as parts of the country reopened. But with the virus surging in parts of the country, the newspaper said a quick economic turnaround is now in question.
Last week, the CBO estimated that the jobless rate will end the year at 10.5%. The agency said output in the fourth quarter will be 5.9% lower than the previous year, even though the economy is slated to grow in the second half of this year.
Spending surged to $1.1 trillion in June. Most of the spending went toward virus relief programs. And while spending increased, the federal reserve dropped 28% to total $241 billion. Senior Treasury officials say they expect that number to rise this month when tax payments are due.
The budget deficit totaled $2.7 trillion for the first nine months of the fiscal year, which is more than triple the deficit during the same time frame a year prior, according to the Treasury. Spending increased 49% and receipts fell 13% between October and June, compared to the year earlier.
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