U.S government posts record deficit of $3.1 trillion in 2020

An unprecedented deficit in the US budget due to Corona spending

At the start of the 2020 fiscal year, the US government had been forecast to rack up a $1 trillion deficit. Democrats and the White House inch closer to compromising on a bill set to cost between $1.8 trillion and $2.2 trillion. For 2020, the government spent $6.552 trillion, up from $4.447 trillion one year ago, according to the data released jointly by the White House and the Treasury Department. The government brought in $3.420 trillion in tax revenue in 2020, a slight decrease from 2019.

Under the agendas of both presidential candidates, debt would reach at least 125 per cent of gross domestic product by 2030, the committee noted.

The deficit is the amount of spending the government does beyond total tax revenue. Interest rates are low, which has made it relatively cheap to issue debt.

The yearly total surpasses the White House's February forecast by more than $2 trillion.

When the president entered office the debt stood at $14.4 trillion. It is now approximately $21 trillion.

USA government bonds were little changed Friday, with the yield on the benchmark 10-year Treasury note ticking up to 0.743% from 0.730% Thursday, according to Tradeweb.

A surge of federal spending to combat the coronavirus and cushion the US economy, coupled with a drop-off in federal revenue amid widespread shutdowns and layoffs, contributed to the widening deficit.

The U.S. government considers money taken from workers and businesses through the tax system to be "revenue", although unlike private sector revenue it is received not through voluntary sales transactions but mandatory collections.

Spending soared across government agencies this year.

The measures closed large parts of the economy, including travel, trade and small businesses.

Although the terms "budget deficit" or "budget gap" suggests that spending financed through borrowing has a lower quality than spending financed through taxes, there is no evidence to back up this notion.

Underscoring the massive fiscal relief efforts this year, the Treasury's report showed $275 billion in outlays for federal additional unemployment compensation that included the now-expired $600 supplemental weekly jobless payments.

America's failure to adequately stimulate the economy helped led to an tepid recovery from the Great Recession, and lawmakers should avoid making the same mistake again, said Angela Hanks, deputy executive director of the Groundwork Collaborative, a left-leaning group. That spending reflects the relief programs Congress passed in the spring to support the economy as millions of Americans were losing their jobs. "Massive investment right now will help the economy grow overall, and if we pursue austerity people will suffer and we will have a slower, more painful recovery across the board". About half of those jobs have been recovered.

"The growth is leveling off". "Which means the deficit numbers will continue to be pretty bad".

Trump's team for weeks has been locked in talks with Democratic leaders in Congress on a new rescue package to follow up on almost $3 trillion in resources deployed in the early days of the pandemic, including the $2.2 trillion CARES Act. In addition to the human toll, the result would be a significant drag on US economic growth.

"It's very concerning to me and we're going to start doing that".

Trump also asserted on Thursday without evidence or explanation that China would pay for the stimulus package, similar to his previous false claim that Mexico would pay for the border wall. Indeed, the US government appears to be far from the limits of its borrowing capacity and the Federal Reserve does not think inflation will rise to its two-percent target for years to come. Spending by the Labor Department, which administers unemployment benefits, jumped to $477 billion in 2020 from $36.4 billion in fiscal 2019.

Treasury officials had no estimate for next year's deficit, but it is likely to be smaller unless another aid package is approved.



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