US Q1 budget deficit surges to record US$573b amid pandemic

[WASHINGTON] As spending remained high amid the coronavirus pandemic, the US budget deficit surged by 61 per cent in the first three months of the 2021 fiscal year, the Treasury Department said Wednesday.

Spending compared to the prior year grew by US$213 billion from October to December, driving the budget gap to US$573 billion and setting quarterly records, a senior Treasury official told reporters.

The deficit for the 2020 fiscal year exploded, jumping more than 200 per cent to an all-time high of US$3.1 trillion, which was more than double the prior record.

The first quarter pace will keep the deficit well below that level in the future, but President-elect Joe Biden has pledged to push for trillions of dollars in new measures to help struggling families and boost the economy.

US government expenditures increased last year due to the mammoth programs Congress approved to help workers and businesses hit by the Covid-19 shutdowns.

However, spending tapered later in the year as some programs lapsed while lawmakers worked to pass a new relief package, and the Treasury official said the impact of a US$900 billion measure approved December 27 will not be seen until January.

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The support programmes, including the US$2.2 trillion CARES Act Congress approved in late March just as the pandemic was forcing businesses to shut down nationwide, are spread throughout various government departments.

The Labour Department saw outlays increased to US$80 billion in the quarter from just US$5 billion a year earlier due to special unemployment benefit programs.

Increased food aid for the poorest families caused Department of Agriculture expenditures to increase by US$19 billion, according to the data.

At the same time however, the cost of servicing the public debt dropped by US$28 billion to US$131 billion in the quarter amid record low interest rates, according to the monthly data.

AFP