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U.S. Budget Gap Tripled to Record $3.1 Trillion in Fiscal 2020, Treasury Says

Spending soared 47% in year ended Sept. 30 as government rolled out programs to battle coronavirus and recession

The U.S. budget deficit tripled to a record $3.1 trillion in the fiscal year that ended Sept. 30 as the government battled the global coronavirus pandemic that plunged the country into a recession, has taken more than 217,000 American lives and thrown millions out of work. As a share of economic output, the budget gap in fiscal year 2020 hit roughly 16.1%, the largest since 1945, the Treasury Department said Friday, when the country was financing massive military operations to help end World War II.

Federal debt totaled 102% of gross domestic product, the first time it has exceeded the size of the economy for the full fiscal year in more than 70 years, according to estimates from the Committee for a Responsible Federal Budget. That has put the U.S. in a league with Greece, Italy and Japan among the most heavily indebted nations.Senate Republicans, citing the mounting debt, have balked at a White House proposal to spend another $1.88 trillion and House Democrats’ $2.2 trillion bill to add to aid to counter the steepest economic downturn since the Great Depression. Many economists and Federal Reserve officials argue restoring growth should be the first priority, and that worries about closing the deficit can come later.

“Unprecedented times call for unprecedented deficits,” said William Hoagland, senior vice president at the Bipartisan Policy Center, a centrist Washington think tank. “Today’s deficit figure is the result of six months of fighting the pandemic and its economic fallout.” The International Monetary Fund this week said global public debt is likely to approach a record 100% of output but urged policymakers to maintain spending to help vulnerable groups and promote a strong recovery. The IMF said the global recession won’t be as deep as it projected earlier, thanks in part to massive deficit spending by advanced and major emerging-market economies. “The IMF’s message from these meetings is clear: Avoid premature withdrawal—pulling the plug too soon risks serious, self-inflicted harm,” Managing Director Kristalina Georgieva told reporters Thursday as finance ministers and central bankers assembled virtually for the annual meetings of the fund and the World Bank.

To cover the budget shortfall, the Treasury has sold a flood of new securities, boosting total government debt held by the public to $21 trillion, a 25% increase from the beginning of the fiscal year. Investors have shown scant worry about the deficit. U.S. government bonds were little changed Friday, with the yield on the benchmark 10-year Treasury note ticking up to 0.743% from 0.730% Thursday, according to Tradeweb. Yields rose in the morning following