The federal government will be swimming in $ 3 trillion in red ink by the end of fiscal year 2021, according to a Congressional Budget Office estimate released Thursday, up 33% from its previous forecast.
As a result of several stimulus measures to combat the economic impact of the pandemic, Congress will have a budget deficit of 13.4% of GDP this year, the second highest level since 1945 and only topped by 2020 spending.
The CBO last released a deficit estimate in February when it saw a deficit of $ 745 billion, less than now forecast. According to current projections, the public debt held by the public, at $ 23 trillion, would increase to 103% by the end of the current fiscal year.
The deficit in 2020 was $ 3.13 trillion and is already $ 2.06 trillion in the first eight months of the fiscal year. The state’s total debt is now $ 28.3 trillion, of which the public holds $ 22.2 trillion.
“The economic disruption caused by the 2020-2021 coronavirus pandemic and the laws enacted in response continue to weigh on the deficit (which was already large by historical standards before the pandemic),” the office wrote in a report.
There was good news: the CBO raised its estimate for gross domestic product, which will grow 7.4% annually through the end of 2021 and 2.8% annually through 2025, well above the historical norm. Unemployment will also continue to decline, according to the report, until it drops to around 4% in 2022 and remains there for several years.
In terms of inflation, the Office sees the consumer spending index rising 2.8% this year. The PCE index is the Federal Reserve’s preferred measure of inflation, which last week showed headline inflation at 3.4%, well above its target of 2%.
The CBO then expects inflation to slow down to 2% in 2022 in the coming years and then hold around 2.1% through 2025. most recently it was 1.48%.
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