US budget deficit soars to $3tn record

US budget deficit soars to $3tn record
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Daily US Times: The US budget deficit has hit a record high of more than $3tn (£2.3tn). The massive gap was driven by the government’s massive spending on coronavirus relief.

The Treasury Department said the federal government spent more than $6tn in the first 11 months of its financial year, including $2tn on coronavirus programmes.

The figure outpaces the $3tn it took in from taxes and the shortfall is more than double the previous full-year record, set in 2009.

At the time, the US was grappling with the aftermath of the 2008 housing financial crisis.

The US was on track to run a deficit of more than $1tn this year even before the pandemic – large by historic standards.

But the spending approved to try to cushion the financial impact of the coronavirus has exploded those projections.

This month, the Congressional Budget Office predicted that the US was likely to run a full-year deficit of $3.3tn, more than triple the shortfall recorded last year. The federal government’s financial year ends in September.

The agency said it expected total US debt to exceed $26tn.

Jerome Powell, the head of the US central bank, told at a hearing in Washington in June, that members of Congress that America’s spending path was “unsustainable”, but said reducing the shortfall should not be a priority given the state of the economy.

The economy shrank at an annual rate of more than 30% in the April-June period, its worst quarterly contraction on record. Data suggest business closures and job layoffs are continuing.

The Labour Department said this week that roughly 30 million people – about 20% of the total American workforce – remain on some form of unemployment benefits, despite reopening underway.

However, many conservatives in Washington remain leery of further spending.

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