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US budget gap balloons to $2.24trn in first nine months

Federal government heads for a deficit.
Image: Paul Yeung, Bloomberg
The U.S. budget gap surpassed $2 trillion in the first three quarters of the fiscal year, showcasing the continuing impact of the Covid-19 crisis as the federal government heads for a deficit that will be close to last year’s all-time record.

The shortfall for June was $174 billion, according to Treasury Department data released Tuesday. By comparison, the June 2020 deficit was $864 billion, fueled by mass fiscal stimulus to curb the economic devastation of the pandemic.

While the monthly deficit is now on the wane, Republicans in Washington have cited the build-up in federal debt in arguing against President Joe Biden’s plans for the biggest ramp-up in social spending programs in decades, aimed at addressing trenchant inequality.

Despite rising inflation in some parts of the economy, interest payments on the debt remain historically low — something Democrats have highlighted in playing down debt concerns.

The full 2021 fiscal year will see a near-record $3 trillion deficit even without further spending, according to the non-partisan Congressional Budget Office. That’s close to the $3.13 trillion in fiscal 2020, which was the largest relative to the size of the economy since World War II.

Spending in June increased 4.6% from the prior month to $623 billion, while receipts fell 3.1% to $449 billion. Stimulus payments fell to $5 billion in June, totaling $560 billion so far this fiscal year.

Agriculture spending has skyrocketed 35% so far this year, to $178 billion, amid increased demand for SNAP food stamp benefits that are administered by that department, Treasury officials said on a conference call with reporters.

Spending for nutritional assistance has increased to $92.2 billion so far this year, nearly double the level over the same period in 2020, according to the Treasury.

© 2021 Bloomberg L.P.

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