The U.S. budget deficit ballooned by 60% to more than half a trillion dollars in the first quarter of fiscal 2021, reflecting in part spending on coronavirus relief programs.
According to a Congressional Budget Office estimate, the deficit rose to $572 billion from $215 billion in the year-ago period. Revenue fell 1.1% to $803 billion while outlays jumped 18% to $1.375 trillion.
The Committee for a Responsible Federal Budget, a watchdog group, has estimated that the deficit is on track to hit $2.3 trillion, or 10.4% of gross domestic product, this year after setting a new record of $3.1 trillion in 2020 as the economy reeled from the coronavirus pandemic.
“The final figure is likely to be significantly higher, as Congress is expected to pass further COVID-19 legislation and possibly additional big-ticket spending on issues such as infrastructure,” The Hill reported.
In the first quarter, amounts withheld from workers’ paychecks fell by $17 billion, or 3%, because of a decline in wages and virus-related legislation. The CARES Act allowed most employers to defer payment of their portion of the Social Security payroll tax on wages paid from March 27, 2020, through Dec. 31, 2020.
Individual income and payroll taxes together fell by $7 billion, or 1%.
On the spending side, almost 40% of the increase in the first quarter was in outlays for unemployment compensation, which rose from $7 billion during the first quarter of 2020 to $80 billion this year.
“That rise is attributable both to increased regular unemployment compensation and to enhanced benefits authorized by the CARES Act,” the CBO said.
Spending by the Department of Agriculture increased by 36%, largely due to payments made to farmers to cover increased marketing costs associated with the pandemic.
“Economists largely agree that deficit-financed spending is a good idea during an economic crisis, but their estimates of how much is necessary vary dramatically” and many warn that “the accumulated debt will have to be addressed once the economy recovers,” The Hill said.