The U.S. budget deficit ballooned to an all-time of $864 billion in June due to fed’s un mitigated reaction to COVID-19, accodring to the Treasury Department, Monday.
[tweet “In contrast, June 2019 had a deficit of just $8 billion – roughly 1/100th the deficit last month”]
Fed spending peaked at over $1.1 trillion last month, more than 2X what the fed spends monthly. Tax revenues collected by the feds stayed flat at $240 billion, largely due to Treasury Department delaying the tax filing deadline to July.
The unprecedented surge in June drove the budget deficit for first nine months of the fiscal year to $2.7 trillion.
Congress had approved $2 trillion in pandemic response spending which did take a few months engage as the economy slowed from the pandemic. Spending included enhanced benefits for the unemployed, stimulus payments and small-business help. Economists say that the funding was badly needed to prevent tens of millions of Americans from being hurt by the pandemic and that more remains necessary.
“Big government deficits are the only thing keeping the U.S. economy on life support, and anti-deficit rhetoric threatens to pull the plug,” said Nathan Tankus, research director at the Modern Money Network. “The alternative is mass defaults, evictions and bankruptcies, which will devastate the United States.”
“Today’s record deficits are mainly a product of our response to the current pandemic,” said Marc Goldwein, senior vice president at the Committee for a Responsible Federal Budget. “Once the economy recovers, we need to get our deficit under control.”
Except for a brief period at the end of the Clinton administration, the federal government has traditionally spent more money than it brings in through taxes and other revenue. To cover the difference, the government issues debt.
Interest rates remain low, making the debt cheap to finance, but it continues to accumulate rapidly. The government ran a deficit that exceeded $1 trillion in 2009, 2010, 2011 and 2012 because of the impact of the financial crisis, but the one-year deficit contracted and was $442 billion in 2015.