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A banker counting currency at a bank in Westminster, Colorado, counts out four thousand dollars. Wednesday, November 3, 2009. Rick Wilking/REUTERS/File Photo (Reuters) – WASHINGTON, July 1 (Reuters) – Despite greater coronavirus aid spending, the US government’s budget deficit would shrink somewhat to around $3 trillion in fiscal 2021, according to the Congressional Budget Office, which cited a faster comeback in economic growth and tax revenues than previous predictions. Based on fourth-quarter comparisons, the nonpartisan CBO anticipates gross domestic product growth to reach 7.4 percent in 2021, tapering to 3.1 percent in 2022, and 1.1 percent in 2023. Due to coronavirus aid programs and a sharp decline in economic activity following COVID-19 lockdowns, the fiscal 2020 budget deficit reached a new high of $3.129 trillion. The CBO forecasted a $2.26 trillion deficit for fiscal 2021, which ends on Sept. 30, in February, but that figure did not take into account the impact of President Joe Biden’s $1.9 trillion pandemic relief package, which was passed in March. The American Rescue Plan, according to the CBO, contributed nearly $1.1 trillion to its fiscal 2021 deficit forecasts. Biden’s proposed expenditures in infrastructure, child care, education, and other social programs, which may add trillions of dollars to spending if not offset by tax or other revenue increases, are not included in the forecasts. However, the CBO stated that a stronger-than-expected economic recovery, aided by healthy consumer demand and increased numbers of Americans receiving COVID-19 vaccinations, was offsetting the deficit impact of some of the rescue spending. “Projected revenues over the next decade are now greater due to a stronger economy and higher taxable incomes,” the agency stated in a report outlining its new projections. The CBO estimates that the fiscal 2021 deficit will be around 13.4% of GDP, down from 14.9 percent in fiscal 2020. In fiscal 2022, the deficit is expected to drop substantially to $1.153 trillion, or 4.7 percent of GDP, and then to $789 billion, or 3.1 percent, in fiscal 2023. The CBO stated that robust post-pandemic economic growth is not sustainable, owing to the slow increase of the US labor force. It forecasts GDP growth of 1.2 percent in fiscal years 2024 and 2025, and 1.6 percent annually in fiscal years 2026-2031, which is lower than its previous projection of potential real GDP growth of 2%. David Lawder contributed to this report.
Paul Simao edited the piece.
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