WASHINGTON – The U.S. is starting the 2021 budget year the way the old year ended, with soaring deficits.
The Treasury Department reported Thursday that the federal government ran up a record October deficit of $284.1 billion, double the red ink of the same month a year ago, as revenues declined while spending to deal with the impact of the coronavirus soared.
The October deficit was double the $134.5 billion deficit logged in October 2019. It smashed the previous October record of a $176 billion deficit set in 2009, when the government was spending heavily to lift the country out of a deep recession caused by the 2008 financial crisis.
The deficit for the 2020 budget year, which ended Sept. 30, totaled a record $3.1 trillion, breaking the old mark for an annual deficit of $1.4 trillion set in 2009.
The Congressional Budget Office is projecting that this year's deficit will remain above the $1 trillion level, coming in at $1.8 trillion, the second largest annual deficit on record but an improvement over the $3.1 trillion set in 2020.
Private economists said the actual deficit this year will depend on a number of factors including whether Congress is able to narrow the differences between Democrats and Republicans to pass more coronovirus relief measures.
“The outlook for the deficit for the full fiscal year depends heavily on the course of the pandemic, the economic recovery and whether additional stimulus measures are passed,” said Nancy Vanden Houten, lead economist at Oxford Economics. She said that if Congress approved another $1 trillion in economic support that could push the deficit to $2.5 trillion next year.
For October, spending totaled $521.8 billion, up 37.3% from a year ago and a record for the month. Big increases were seen in various government agencies working to blunt the economic downturn from the coronavrious pandemic.
Revenues fell by 3.2% to $237.7 billion, reflecting in part a $14 billion decline in personal income tax collections, as millions of people who have lost jobs during the pandemic are no longer having taxes withheld from paychecks.
The government's budget year runs from October through September.
Congress has been deadlocked on passage of another virus relief bill since this summer with Democrats pushing for more money than Republicans are willing to spend. The election of Joe Biden as president has so far not unblocked the impasse with Democrats calling for the GOP to resume negotiations on a $2.4 trillion bill that was passed by the House in May.
The October deficit, while a record for the month, was far below the all-time monthly record of $864.1 billion set in June as the spending on the $3 trillion in coronavirus support measures passed by Congress ramped up.
In a September report, the CBO forecast annual deficits will remain above $1 trillion through 2030.
This story has been updated to correct that the CBO's 2021 deficit forecast is $1.8 trillion, not $3.3 trillion.