The federal deficit has already reached $1.7 trillion in the first six months of fiscal 2021, higher than every full-year deficit before 2020, according to estimates from the Congressional Budget Office.
“Outlays were 45 percent higher and revenues were 6 percent higher from October through March than during the same period in fiscal year 2020,” the nonpartisan agency said, noting that almost all of the increase was linked to the COVID-19 pandemic.
“Most of that difference arises from spending for three purposes, largely in response to the coronavirus pandemic: refundable tax credits, unemployment compensation, and the Small Business Administration’s Paycheck Protection Program.”
In March alone, following the passage of the $1.9 trillion American Rescue Plan which, among other things, authorized stimulus payments of $1,400 to go out to individuals, the deficit was $658 billion. That figure was roughly the same as the entire deficit in 2016.
Before last year’s deficit shattered records at $3 trillion, the highest annual deficit on record was $1.4 trillion in 2009, when the government was responding to the Great Recession.
Treasury Secretary Janet Yellen has defended the large deficits, saying big efforts to rescue the economy will pay off.
The IMF upgraded its growth forecast for the U.S. to 6.4 percent for the year, crediting vaccinations and strong fiscal action.
“The ARP’s passage has contributed to significant upward revisions in U.S. and global growth forecasts,” Yellen said Thursday. “The United States could reach full employment as soon as next year.”
The eye-popping numbers may make it harder for President Biden to sell his $2.25 trillion infrastructure plan to Republicans, though he has suggested tax increases to cover the costs.
Sen. Chris Coons (D-Del.), a close Biden ally, suggested Republicans were more open to deficit financing for some of the plan than raising taxes to the level Biden proposed.