U.S. federal budget deficit is expected to surge this year to the highest percentage of gross domestic product (GDP) since the World War II as a result of the CCP Virus (coronavirus) pandemic, according to a new projection by the Congressional Budget Office (CBO).
In an update to the budget outlook released on Wednesday, Sept. 2, the CBO projected the budget deficit would hit $3.3 trillion in fiscal year 2020, which ends on Sept. 30, more than triple the shortfall recorded in 2019.
“That increase is mostly the result of the economic disruption caused by the 2020 coronavirus pandemic and the enactment of legislation in response,” the nonpartisan office explained.
Accordingly, the federal deficit in 2020 is projected to be 16% percent of GDP, which would be the largest deficit-to-GDP ratio since 1945. However, the ratio is expected be halved to 8.6% in 2021.
In its projections, the CBO forecasts that the annual deficits relative to the size of the U.S. economy generally continue to decline through 2027 before increasing again in the last few years of the 2020-2030 period, reaching 5.3% of GDP in 2030.
As a result of those deficits, the federal debt is projected to rise to 98% of GDP in 2020 from 79% at the end of 2019. The debt held by the public is forecast to exceed the size of the economy by 2021 and increase to 107% in 2023, the highest in the nation’s history.
The CBO said that its September deficit estimate increased $2.2 trillion from March, driven by economic relief legislation.
The latest estimate for 2020 factors in $3.6 trillion in spending that Congress approved in four rounds of the CCP Virus emergency relief, which were designed to boost the economy and shield millions of American workers from financial ruin.
While Democrats and Republicans are discussing another relief package, the CBO’s latest report could make it harder for them to agree to a new measure.