The federal deficit for 2020 is believed to have hit a record-smashing $3.1 trillion in 2020, well over double the highest deficit on record, according to an estimate by the Congressional Budget Office released Thursday.
The official figures from the Treasury Department are expected later this month.
Even before the pandemic, the deficit was on track to exceed $1 trillion for the only time since the four-year period following the Great Recession. The fiscal response to that economic downturn led to the previous record deficit of $1.4 trillion in 2009, but that number steadily declined until the mid-2010s.
Since President Trump took office, the deficit has grown dramatically on the back of unfunded tax cuts and increased spending on both defense and domestic priorities.
But the advent of the novel coronavirus and the massive government response exploded the deficit this year, though the estimate is below the $3.3 trillion expected even a few weeks ago.
“Relative to the size of the economy, the deficit—at an estimated 15.2 percent of gross domestic product (GDP)—was the largest since 1945, and 2020 was the fifth consecutive year in which the deficit increased as a percentage of GDP,” the CBO report noted.
The Committee for a Responsible Federal Budget, a watchdog group, said the deficit had pushed the nation’s debt burden to 102 percent of GDP, surpassing 100 percent of GDP for the first time since World War II.
“It is hard to believe we now owe a full year’s worth of output,” the group’s president, Maya MacGuineas, said.
“We weren’t supposed to cross this threshold for over a decade, but here we are. Debt is the size of the economy today, and soon it will be larger than any time in history,” she added.
Most economists argue that high deficits are appropriate during periods of economic crisis to keep the economy afloat, and say they should be dealt with during times of economic growth. If left unchecked, the debt burden can slow economic growth, leave the nation unprepared to handle a crisis, and “crowd out” both private investment and government spending priorities.
The deficit has become a central battleground in the fight over a fifth COVID-19 relief package.
Republicans have rejected Democratic calls for a $3.4 trillion bill, and have continued to argue over a reduced offer of $2.2 trillion. The White House has signaled willingness to increase its $1 trillion bid to about $1.5 trillion. Senate Republicans have only agreed to a $600 billion bill.
The disagreements have dragged on for months, despite entreaties from Federal Reserve Chairman Jerome Powell to “go big” with the fiscal response.
The stalemate has left a void in the safety net, as extra unemployment benefits and a small business loan program expired in July, airlines struggle, and states and local governments have run down funds as schools seek solutions of how to teach through a deadly pandemic.
Trump abruptly called off the talks in a Tuesday tweet.