The Congressional Budget Office (CBO) just released some of its predictions for the next decade. “Bleak” would about sum the report up.
But, one of the scariest of the CBO’s projections is the federal deficit, which the agency expects to be in record-breaking territory this year.
The federal deficit
The biggest federal deficit ever was witnessed during the 2020 fiscal year. It was $3.13 trillion. The CBO doesn’t expect the federal deficit to get quite that high this year, but it does expect it to get close.
In its report, the CBO projects the United States, in the fiscal year 2021, to take in about $3.8 trillion while spending $6.8 trillion. Accordingly, the agency is predicting roughly a $3 trillion deficit.
The CBO, here, revised an earlier projection that it made about the 2021 federal deficit. This $3 trillion figure is up about $745 billion from that earlier prediction.
What is going on?
It is fairly clear that 2020’s record-breaking federal deficit was the result of the coronavirus pandemic. The previous fiscal year, 2019, only saw a federal deficit of $1 trillion.
The CBO, with regard to its prediction for 2021, states that the “economic disruption caused by the 2020–2021 coronavirus pandemic and the legislation enacted in response continue to weigh on the deficit.”
This “economic disruption,” of course, would include things like lockdowns and other government-enacted measures that prevented the economy from running.
But, what certainly didn’t help the situation, from a federal deficit perspective, is the massive $1.9 trillion coronavirus package that President Joe Biden and the Democrats forced through Congress. Many have argued that this has only slowed down America’s economic recovery, and the numbers would seem to support that argument.
The CBO does expect the federal deficit to return to pre-epidemic levels until the fiscal year 2022.
The CBO is projecting fiscal year 2022 to have a federal deficit in the range of $1.15 trillion, and it is projecting fiscal year 2023 to have a federal deficit of about $800 billion. A couple of years later, in 2025, however, the CBO expects the federal deficit to increase once again.
For this fiscal year, besides the $3 trillion federal deficit, the CBO is also predicting a gross domestic product (GDP) increase of 7.4 percent, a consumer price index increase of 3.4 percent, and an unemployment level of 4.6 percent.