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Tags: budget | deficit | cbo | coronavirus | spending

CBO Sees Federal Debt Exceeding Size of Economy in 2021

CBO Sees Federal Debt Exceeding Size of Economy in 2021
(Tang90246/Dreamstime)

Wednesday, 02 September 2020 02:26 PM

The nonpartisan U.S. Congressional Budget Office on Wednesday said the federal budget deficit for fiscal 2020 will hit $3.3 trillion, 16% of gross domestic product, down from its April 24 preliminary estimate of $3.7 trillion.

Federal deficits were projected to fall to $1.8 trillion in the fiscal year beginning Oct. 1, the CBO said, and will total $13 trillion over 10 years.

So far this year, more than $3 trillion in emergency coronavirus pandemic aid has been enacted into law.

These huge federal outlays have caused a surge in this year's already large deficit and federal debt.

"This report shows that our unsustainable fiscal challenges have rapidly accelerated, as our national debt will now exceed the size of our entire economy next year," said Peter G. Peterson Foundation Chief Executive Michael Peterson. The group works to increase public awareness of the urgent fiscal challenges facing America's future.

The CBO's forecast did not include another round of coronavirus aid Congress might consider, which could exceed $1 trillion.

The $3.3 trillion budget deficit this year, if realized, would be more than triple the shortfall recorded in 2019. And a budget deficit at 16% of GDP would be the largest since 1945.

Meanwhile, federal debt held by the public was projected to rise sharply, to 98% of GDP in 2020, compared with 79% at the end of 2019 and 35% in 2007, before the start of the previous recession, the CBO said.

Debt held by the public will reach $21.9 trillion in the fiscal year ending September 2021, or the equivalent to 104.4% of gross domestic product, up from 98.2% in the current year, the CBO said Wednesday in updated projections.

Debt will increase to $33.5 trillion at the end of 2030, or 109% of GDP; the previous 10-year projection, in March, saw the figure at 98% in 2030.

The CBO also sounded alarms over the viability of the Social Security, Medicare, military retirement and other trust funds, predicting they would be depleted within 10 years unless Congress addresses the shortfalls.

"Trust fund deficits are larger than previously projected in part because of economic disruption caused by the pandemic," the agency said. Growing numbers of beneficiaries was also contributing to the problem.

The Medicare hospital insurance fund for the elderly will run out of money by 2024, the CBO estimated.

© 2022 Thomson/Reuters. All rights reserved.


Economy
The U.S. federal budget deficit will soar to a record $3.3 trillion this fiscal year, swelling government debt to a size bigger than the economy in the wake of massive spending to cushion Americans from the coronavirus pandemic, according to the Congressional Budget...
budget, deficit, cbo, coronavirus, spending
387
2020-26-02
Wednesday, 02 September 2020 02:26 PM
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