WASHINGTON — The federal budget deficit soared to a record $3.1 trillion in the 2020 fiscal year, official figures showed on Friday, as the coronavirus pandemic fueled a surge in spending and a drop in tax receipts brought by households' and businesses' struggling with economic shutdowns.
The federal government spent $6.55 trillion in 2020, while tax receipts and other revenue trailed at $3.42 trillion. Much of the spending came from the $2.2 trillion economic relief package that Congress passed in March, which was financed by government borrowing. Total debt held by the public topped $21 trillion at the end of September, a record level.
The shortfall underscores the long-term economic challenge facing the United States as it tries to emerge from the sharpest downturn since the Great Depression. Interest rates are low — meaning it costs less for the government to borrow money — but the ballooning deficit is already complicating policy choices as Republicans resist another large stimulus package, citing concerns about the US debt burden.
The deficit — the gap between what the US spends and what it earns through tax receipts and other revenue — was $2 trillion more than what the White House’s budget forecast in February. It was also three times as large as the 2019 deficit of $984 billion.
According to the nonpartisan Committee for a Responsible Federal Budget, the nation’s debt now surpassed the size of the economy, amounting to 102 percent of gross domestic product.
“It is hard to believe we now owe a full year’s worth of output,” said Maya MacGuineas, president of the committee. “We weren’t supposed to cross this threshold for over a decade, but here we are.”
MacGuineas noted that the last time America’s debt exceeded the size of the economy was at the end of World War II, and that it took years of balanced budgets to bring it down.
The annual deficit was the largest since 2009, when the United States recorded a $1.4 trillion shortfall during the financial crisis.
In a statement accompanying the annual budget report, Treasury Secretary Steven Mnuchin highlighted the extraordinary level of money that has been pumped into the economy this year to combat the recession and prop up the economy. Russell T. Vought, director of the Office of Management and Budget, said that as the recovery continued, the fiscal picture would improve as companies hired back workers and people began spending more money.
Even the most ardent deficit hawks agreed that the virus, which shut down large swaths of the economy and tossed millions out of work, necessitated a huge fiscal response.
But with Election Day approaching, Republican lawmakers have shown little appetite for more spending, despite the fact that millions remain unemployed and previous aid has largely dried up. While the White House and Democrats want to bankroll another $1 trillion-plus aid package, Senate Republicans are preparing a $500 billion bill to vote on later this month. Speaker Nancy Pelosi and House Democrats support a $2.2 trillion package, while President Trump has endorsed going higher than the $1.8 trillion proposal the White House previously proposed.
On Thursday, he told Mnuchin, who is leading the negotiations, to make a bigger offer and said, “Go big or go home.”
The Treasury secretary acknowledged this week that the deficit is a long-term concern but said now is not the time to worry about bringing it down. Given low interest rates and the severe nature of a health crisis that has stalled so many parts of the economy, he said the deficit was not an immediate priority.
“When you’re in a war — and we’re in a war against COVID — you spend what it takes to get rid of it,” Mnuchin said Wednesday at the Milken Institute conference. “And that’s what we’ve done.”
Treasury officials had no estimate for next year’s deficit, but it is likely to be smaller unless another aid package is approved.