3 trillion + (!) 2020 deficit--DOUBLE record by Obola, '09--money no object for Trump re-election

[Apollonian]

Federal government deficit hits all-time record of $3.1 TRILLION in 2020 - more than double the last record set under Obama in 2009 ​

Link: http://www.yourdestinationnow.com/2020/10/federal-government-deficit-hits-all.html

October 17, 2020

The federal budget deficit hit an all-time high of $3.1 trillion in the 2020 budget year, more than double the previous record, as the coronavirus pandemic shrank revenues and sent spending soaring.

The Trump administration reported Friday that the deficit for the budget year that ended on Sept. 30 was three times the size of last year's deficit of $984 billion. It was also $2 trillion higher than the administration had estimated in February, before the pandemic hit.

It was the government's largest annual shortfall in dollar terms, surpassing the previous record of $1.4 trillion set in 2009. At that time, the Obama administration was spending heavily to shore up the nation's banking system and limit the economic damage from the 2008 financial crisis.

The 2020 deficit, in terms of its relationship to the economy, represented 15.2% of total gross domestic product, the sum of all the goods and services produced by the country. That was the highest level since 1945, when the U.S. was borrowing heavily to finance World War II.

How government revealed the scale of the deficit in special note in annual report

I spent it: Donald Trump's Treasury Secretary revealed the full extent of the deficit in fiscal year 2020 - $3.1 trillion

The administration's final accounting of the 2020 budget year shows that revenues fell by 1.2% to $3.42 trillion, while government spending surged 47.3% to $6.55 trillion. That spending reflects the relief programs Congress passed in the spring to support the economy as millions of Americans were losing their jobs.

Many of the benefit programs expired in late July or early August, and so far Democrats and Republicans have been unable to agree on legislation to re-instate them. Republicans have balked at the level of spending sought by Democrats, who warn that without significant support the country could be facing a double-dip recession.

While about half of the 22 million jobs lost in March and April have been recovered, the concern is that without more government support, those still without work will be unable to make their rent or mortgage payments and buy food. In addition to the human toll, the result would be a significant drag on U.S. economic growth.

President Donald Trump has said he is willing to compromise with Democrats on a new relief package but Senate Republicans have indicated they don't support the spending levels being put forward by Democrats.

'The administration remains fully committed to supporting American workers, families and businesses and to ensuring that our robust rebound continues,' Treasury Secretary Steven Mnuchin said in a statement released with the budget report.

The joint report from Treasury and the Office of Management and Budget showed that total government receipts of $1.61 trillion were $286 billion lower than the administration had projected in February. That reflected a drop of $203 billion in individual income taxes from the February forecast and a decline of $51.8 billion in corporate income taxes from the February projection.

The $6.55 trillion in spending - $1.76 trillion higher than the administration´s February estimate - includes the coronavirus relief programs passed by Congress, such as individual economic impact payments of $1,200, expanded weekly unemployment benefits of $600 per week and the Paycheck Protection Program to provide support to small businesses.

Despite all the borrowing required to finance the surging deficit, interest payments on the debt actually came in $53.8 billion below the administration´s February projection. That was due to interest rates being lower than expected this year because of the recession that began in February.

The low interest rates are a key reason economists are not as concerned about the rising debt burden caused by the deficit. The federal deficit is approaching 100% of GDP and is projected to top that amount in 2021.

'It´s disappointing to both candidates for president proposing trillions of dollars in additional debt,' said Maya MacGuineas, president of the Committee for a Responsible Federal Budget. 'The deeper we dig this hole, the harder it will be to claw our way out.'

 

[Apollonian]

US Public Debt Now Exceeds Economic Output, US Budget Gap Triples to Record $3.1 Trillion on Virus Relief (M2 Velocity Crashes To All-time Low)​

October 17, 2020 by IWB

Link: https://www.investmentwatchblog.com...s-relief-m2-velocity-crashes-to-all-time-low/

by confoundedinterest17

This is a nightmare. A nightmare on Constitution Avenue.

(Bloomberg) — The U.S. budget deficit more than tripled to a record $3.1
trillion in the latest fiscal year on the government’s massive spending aimed at softening the blow from the coronavirus pandemic.

The increase brought the deficit as a share of gross domestic product to 16% in the year ending in September, the largest since 1945, a Treasury Department report showed Friday. At the end of the financial crisis in

2009, the ratio was close to 10% before slowly narrowing through 2015.

Investors have handed the government ultra-low borrowing costs to finance the spending, resulting in a 9% drop in federal interest payments during the year. But the national debt is now bigger than the size of the economy, and it could be almost double GDP by 2050 as an aging population places more demands on Social Security and Medicare, according to the Congressional Budget Office.

The risk is that in the long term, rising debt could end up sparking inflation and repelling investors if the market becomes too saturated. Federal Reserve Chair Jerome Powell and other officials say eventually the debt trajectory will need to be addressed, but now isn’t the time to worry because unemployment remains high and the pandemic has crushed many businesses, warranting further support for the economy.

While the central bank cut the benchmark interest rate to near zero in March and expects to keep borrowing costs very low likely for years to come, lawmakers remain deadlocked over additional fiscal aid ahead of the Nov. 3 election.

The report showed federal spending jumped 47.3% to $6.55 trillion in fiscal 2020, driven by increased outlays for unemployment compensation and small businesses that were approved by President Donald Trump and Congress. Government revenue declined 1.2% as receipts from individual and corporate income taxes fell.

Underscoring the massive fiscal relief efforts this year, the Treasury’s report showed $275 billion in outlays for federal additional unemployment compensation that included the now-expired $600 supplemental weekly jobless payments. Spending for state unemployment benefits totaled nearly $196 billion in the fiscal year.

Spending on national defense went from the second-largest outlay in fiscal 2019 to fifth in 2020 as pandemic-induced spending resulted in larger spending for income security, health and Medicare.

As Congress and the Administration continue the spending splurge, what are the odds that spending (and borrowing) will decline after Covid recedes? Especially with declining money velocity and exploding public debt.