US budget deficit to hit record US$3.3 trillion due to coronavirus, recession

The US federal budget deficit is projected to hit a record US$3.3 trillion as huge government expeditures to fight the coronavirus and to prop up the economy have added more than US$2 trillion to the federal ledger, the Congressional Budget Office said Wednesday.

The US budget deficit will hit a record US$3.3 trillion amid the COVID-19 pandemic and a recession. (Photo: A jogger runs in Main Street Park in the Brooklyn borough of New York, US, on Wednesday, May 22, 2019.)

That’s more than triple the 2019 shortfall and more than double the levels experienced after the market meltdown and Great Recession of 2008-2009. Government spending, fuelled by four coronavirus response measures, would register at $6.6 trillion, $2 trillion-plus more than 2019.

The economy shut down in the spring so people could be in isolation, in a failed national attempt to defeat the pandemic. That shutdown led lawmakers and President Donald Trump to pump money into business subsidies, larger unemployment benefits, $1,200 direct payments, and other stimulus steps that have helped the economy in the short term.

The Trump administration issued US$1,200 stimulus checks to citizens in hopes to stimulate the economy, which has contributed to its growing deficit. (Photo: People wearing protective masks listen to instructions at a Catholic Charities Brooklyn and Queens pop-up food pantry in the Brooklyn borough of New York, US, on Friday, May 29, 2020.)

But deficit scolds have long warned that rising levels of debt will serve as a drag on the economy in the coming years. The Federal Reserve has stepped in to keep credit markets stable and interest rates low.

Lawmakers and the White House are currently quarrelling over the size and scope of a fifth virus relief bill, with Republicans growing skittish at the enormous costs of battling the pandemic.

The enormous deficit is bringing the federal debt, as measured by the size of the economy, near levels not experienced since the end of World War II. At year’s end, the amount of debt held by investors will approach the size of the economy.