US economy

U.S. Budget Deficit Hit $2.8 Trillion in Fiscal 2021

The federal budget deficit reached $2.8 trillion for 2021, the second-highest total on record but an improvement from the prior year as an economy starting to recover from the coronavirus pandemic bolstered tax revenue.

Official figures released on Friday showed that the budget shortfall in the 12 months that ended on Sept. 30 — the government’s fiscal year — was not as severe as the White House projected earlier this year. The Biden administration attributed the improvement to the $1.9 trillion relief package passed by Congress and the rollout of the vaccines, which has accelerated the reopening of the economy.

The budget deficit was down from the record $3.1 trillion that the United States recorded in fiscal year 2020, as the pandemic gripped the economy.

This year, tax revenue rose to $4 trillion, as wealthier individuals and corporations paid more in taxes than expected. Government outlays grew to $6.8 trillion, as relief payments, rental assistance money and funds for states and cities were distributed across the country.

Annual budget deficits previously peaked at around $1.4 trillion in the aftermath of the 2008 financial crisis. They were declining before picking up during the first three years of the Trump administration and then soaring last year as the government pumped out trillions of dollars to support the economy.

The Congressional Budget Office projects that the 2022 deficit will ease to $1.15 trillion and continue to decline over the next few years before rising again later in the decade. But those projections depend on the what spending policies lawmakers are able to enact.

The Biden administration is negotiating with lawmakers in Congress over about $2 trillion in additional spending on social and climate initiatives and debating how to pay for those programs.

The Biden administration also faces another deadline in early December to raise or suspend the statutory limit on how much debt the federal government can carry. Republicans and Democrats are already girding for another standoff over how that should be accomplished. Republicans claim that raising the borrowing cap would be the fiscally responsible thing to do, while Democrats note that doing so allows the government to pay bills it already has incurred.

Treasury Secretary Janet L. Yellen said in a statement on Friday that the budget numbers were proof that the economy was recovering and a sign that President Biden’s economic plans are working.

“While the nation’s economic recovery is stronger than those of other wealthy nations, it is still fragile,” Ms. Yellen said.

Ms. Yellen has argued that because interest rates are so low, the United States can afford to take on additional debt to make investments to build and fix infrastructure and protect the environment. She said on Friday that doing so would improve the “long-run fiscal and economic health” of the United States.


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