The federal budget deficit is on course to reach $2.3 trillion for the 2021 fiscal year even if Congress does not pass another economic rescue bill, an amount slightly lower than the $3 trillion level it topped last year but still the second-highest deficit since World War II, the Congressional Budget Office said in new forecasts released Thursday.
Yet the updated projections show an improving fiscal picture for the government than what the budget office forecast in the fall. The budget office now sees the U.S. economy recovering faster than it previously expected, buoyed by stimulus and the ability of American businesses to adapt to the pandemic.
The 2021 deficit projection has grown compared to the office’s September forecasts, largely as a result of a $900 billion economic aid bill Congress passed in December. But projected deficits for the ensuing several years have shrunk by even more as a result of faster-than-expected economic growth, which is projected to increase tax and other federal revenue.
Those projections are likely to fuel efforts by President Joe Biden and congressional Democrats to speed passage of a $1.9 trillion aid package, which includes money to fight the coronavirus and help for struggling households and businesses. Republicans have objected to the size of the package, saying it is not necessary to spend that much at this point in the recovery and that it will further bloat the federal deficit. But Democrats, who are preparing to pass as much of the package as they can without Republican support, are likely to point to the CBO’s forecasts as justification for approving more aid.
Still, the report highlights just how much money the United States is borrowing to finance all its spending. The budget office now expects the total amount of federal debt to reach 105% of the size of the nation’s economy by 2030, down slightly from its September forecast of 109%. The total debt grew to larger than the size of the nation’s economic output last year as a result of the pandemic recession and trillions of dollars in federal spending to combat it.
Officials at the budget office said that another set of reports to released Thursday afternoon would show that several federal trust funds, including those for Social Security and for the nation’s highways, were now expected to remain solvent for years longer than the office projected in September.
The report also now forecasts that the deficit will dip briefly below $1 trillion in the 2023 and 2024 fiscal years, before rising again in the second half of the decade. From 2021 through 2031, the deficit is forecast to average $1.2 trillion per year.