WASHINGGTON (Washington Post) - The federal deficit will hit $3 trillion in 2021 for the second consecutive year, primarily because of the national spending blitz in response to the coronavirus pandemic, the Congressional Budget Office said Thursday.
The deficit represents a slight decrease from last year but is triple that of 2019, and amounts to one of the biggest imbalances between federal spending and revenue in American history, the nonpartisan budget office said. But the CBO also projected faster-than-expected economic growth, with unemployment falling more sharply than previously predicted — a shift cheered by administration officials.
In 2021, the federal government is projected to spend $6.8 trillion — higher than even last year’s total — while collecting about $3.8 trillion in revenue. Although spending is elevated from last year, the United States will take in more revenue as the pandemic fades and consumers resume normal activities — which is why the overall deficit will shrink modestly.
President Biden’s $1.9 trillion stimulus, passed in March, accounts for much of this year’s spending imbalance. But that measure is temporary and will soon expire. The CBO projects the deficit will fall to $1.2 trillion in 2022 before dropping to $800 billion in 2023 and 2024 as pandemic relief measures fade. However, the budget office projects that the deficit will again begin to widen in 2025 and grow steadily for the rest of the decade, approaching close to $2 trillion by 2031.
“It’s more than any other year besides last year, which is in line with what we expect given the American Rescue Plan,” said Marc Goldwein, senior vice president at the nonpartisan Committee for a Responsible Federal Budget.
The CBO projects brisk economic growth, with the nation’s gross domestic product surging to 7.4 percent in 2021 before leveling off at a still-robust 3.1 percent in 2022. It also projects the unemployment rate falling to 3.8 percent in 2022.
The forecast calls for a sharp rise in inflation, close to 3 percent in 2021, then falling to about 2 percent by 2022 and remaining around that level through 2025 at its pre-pandemic rate. The drop is in line with expectations from the Federal Reserve and the Biden administration.