The US government's budget deficit is projected to hit $3 trillion for the second year in a row, according to a Congressional Budget Office estimate released Thursday.
After a year of enormous amounts of federal spending during the COVID-19 pandemic, Congress will run a budgetary shortfall this year equivalent to 13.4% of GDP, the second-largest level since 1945, the office said.
“The economic disruption caused by the 2020–2021 coronavirus pandemic and the legislation enacted in response continue to weigh on the deficit (which was already large by historical standards before the pandemic),” the office wrote in its report.
While the 2021 deficit is $126 billion smaller than the 2020 deficit, it is still almost triple the $1.2 trillion deficit the government ran in 2019.
The last deficit estimate CBO released for this year was in February, when it saw a deficit $745 billion smaller than the one predicted now. Under the current projections, the $23 trillion portion of government debt held by the public would soar to 103% by the end of the current fiscal year.
Also, according to the agency’s projections, the deficit will fall sharply to $1.153 trillion, or 4.7% of GDP in fiscal 2022, and to $789 billion, or 3.1%, in fiscal 2023.
Meanwhile, inflation is projected to increase to 3% over the year, also a dramatic rise.
At the same time, the CBO projected that the US economy will expand by 6.7% in 2021 and 5% in 2022, some of the fastest rates in decades.
A stronger-than-expected economic rebound, aided by robust consumer demand and the increasing numbers of Americans being vaccinated against the coronavirus, was offsetting the effect of some of the stimulus measures on the deficit.
"Projected revenues over the next decade are now higher because of the stronger economy and consequent higher taxable incomes," the agency said in its report.
Unemployment also will continue to decrease, the report said, until it falls to nearly 4% in 2022 and remains there for several years, it added.