U.S. Deficit Expected to Hit $3 Trillion in 2021, Budget Office Says

Mr. Biden’s stimulus plan will push the federal budget deficit near record highs for the fiscal year, the budget office projected, but it will eventually leave the country in slightly better fiscal shape.

The spending approved by Mr. Biden is projected to increase the deficit by $1.1 trillion for the fiscal year, which ends in September. The total deficit of $3 trillion would be the second-largest since 1945, in nominal terms and as a share of the economy, behind the 2020 fiscal year.

But the increased growth that is accompanying the larger deficit this year will slightly improve the country’s fiscal outlook over the next decade, with the total deficit falling by about 1 percent, the budget office said.

“Projected revenues over the next decade are now higher because of the stronger economy and consequent higher taxable incomes,” it wrote in its report.

Mr. Biden’s rescue plan included direct payments of $1,400 each to low- and middle-income Americans, $350 billion to help states and municipalities patch what were expected to be budget shortfalls and hundreds of billions of dollars to accelerate vaccines and more widespread coronavirus testing. It also extended supplemental federal payments of $300 a week to unemployed workers through September, a benefit that Republican governors across the country have ended early as business owners complain of difficulties finding workers.

The budget office cited those benefits as “dampening the supply of labor,” along with workers’ health concerns. It said the expiration of the benefits, along with less worry about contracting the virus, would help bolster employment growth in the second half of this year.

Inflation, which has been a big topic in Washington, is projected to moderate in the months to come. The office forecast inflation rising above recent trends to hit 2.6 percent for the year, which is stronger growth than the February projection, yet officials see those price pressures subsiding in the second half of the year, as a variety of supply constraints ease in areas like lumber and automobiles.

Article source: https://www.nytimes.com/2021/07/01/business/economy/united-states-deficit.html