U.S. Budget Deficit Tops $1 Trillion This Year, Before Stimulus

The U.S. budget deficit surpassed $1 trillion for the first five months of the fiscal year, reflecting government efforts to cushion the economy from the coronavirus even before a massive stimulus package deepens the shortfall.

The gap for February was $310.9 billion, up from $235.3 billion in February 2020, according to a Treasury Department report Wednesday. That pushed the deficit to $1.05 trillion, a record for the first five months of the fiscal year that began in October, compared with $624.5 billion a year earlier, before the coronavirus struck.

President Joe Biden on Friday is set to sign into law $1.9 trillion in economic relief, a much larger amount than analysts initially forecast would clear Congress. The bill is set to juice economic growth with direct payments to most households and extended benefits for the unemployed.

Republicans have cited ballooning deficits and debt in opposing the stimulus bill, while Democrats argued that failing to provide further major relief would be more harmful to the economy than any increase in the budget deficit -- especially when interest rates remain relatively low.

The Treasury’s February report reflects measures enacted under the $900 billion Covid-19 aid package that passed in late December, but not the $1.9 trillion stimulus.

Biden’s American Rescue Plan Act will further widen the deficit by $1.16 trillion this year and $528.5 billion in 2022, the Congressional Budget Office said Wednesday. That and Biden’s other planned spending would potentially push the deficit in 2021 beyond that of the prior year, which itself was a record relative to the size of the economy in the post-World War II era.

The increase in the February gap was led by spending, which rose 32.1% from a year ago. Meanwhile, revenues increased by a similar magnitude, though remained well below outlays.

©2021 Bloomberg L.P.

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.