Congress stalled on talks for a new Coronavirus stimulus package, and President Trump ended negotiations this week, potentially saving the government trillions of dollars. While the lack of stimulus isn’t good for Americans, it will temporarily ease the financial strain on the federal government.
According to data from the Congressional Budget Office, 2020’s deficit was a whopping $3.1 trillion, one of the highest on record when adjusted for inflation and GDP.
Important Facts About the Federal Budget Deficit
The federal deficit is often used by analysts and the public to measure the efficiency and success of the government in power. America has now been operating with a deficit since 2002.
The 2020 fiscal year, which has just ended, generated a deficit of $3.1 trillion. When compared to the size of the economy, it is the highest since 1945. This year marks the fifth consecutive year where the deficit increased in proportion to GDP. The deficit is roughly 15.2% of the nation’s total GDP.
The deficit was largely driven by costs and early stimulus measures during the Coronavirus Pandemic. Between October 2019 and March 2020, the deficit had only increased by 9% year over year. Despite being so high, it’s around $180 billion lower than what officials had expected.
The federal government collected $3.4 trillion in revenue during the 2020 fiscal year. Total outgoings were $6.6 trillion.
What Does the Deficit Mean for the Government?
An increased deficit means that the government is taking on more debt to meet its spending needs. It limits the flexibility that the federal government has to provide future stimulus and measures to support the economy and America’s citizens.
President Trump campaigned on a promise to eliminate the federal deficit. It has increased every year since 2017, both in monetary terms and as a percentage of GDP. The President has now made the deficit a talking point in his campaign for a second term, pledging again to eliminate it if he is reelected.
The budget shouldn’t have any sizable impact on stock markets this week. Investors have expected a high deficit for months now. Markets were up yesterday after President Trump suggested that individual stimulus checks, airline bailouts, and small business payroll protections could be rolled out before the election.
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