Biggest Budget Deficit Since the End of WWII is On the Way

Mish

Grim Budget Outlook

Please consider the CBO's Budget Outlook 2020 to 2030 as revised in September.

Key Details

  • Deficits. CBO projects a federal budget deficit of $3.3 trillion in 2020, more than triple the shortfall recorded in 2019. At 16.0 percent of gross domestic product (GDP), the deficit in 2020 would be the largest since 1945. The deficit in 2021 is projected to be 8.6 percent of GDP. Between 1946 and 2019, the deficit as a share of GDP has been larger than that only twice. In CBO’s projections, annual deficits relative to the size of the economy generally continue to decline through 2027 before increasing again in the last few years of the projection period, reaching 5.3 percent of GDP in 2030. They exceed their 50-year average of 3.0 percent in each year through 2030.
  • Debt. As a result of those deficits, federal debt held by the public is projected to rise sharply, to 98 percent of GDP in 2020, compared with 79 percent at the end of 2019 and 35 percent in 2007, before the start of the previous recession. It would exceed 100 percent in 2021 and increase to 107 percent in 2023, the highest in the nation’s history. The previous peak occurred in 1946 following the large deficits incurred during World War II. By 2030, debt would equal 109 percent of GDP.
  • Outlays. Federal outlays are projected to equal 32 percent of GDP in 2020, 11 percentage points (or about 50 percent) above what they were in 2019 and the highest percentage since 1945. Projected outlays fall relative to GDP over the following four years, as pandemic-related spending wanes and low interest rates reduce net interest outlays. In the second half of the projection period, outlays rise from about 22 percent of GDP to 23 percent in 2030. That change results from increased spending for major entitlement programs because of the aging of the population and rising health care costs, as well as from increasing net outlays for interest due to rising interest rates and debt.
  • Revenues. Federal revenues are projected to fall from 16.3 percent of GDP in 2019 to 15.5 percent in 2021, primarily because of the economic disruption caused by the pandemic and the federal government’s response. Revenues rise after 2021, reaching almost 18 percent in 2030, as a result of the expiration of temporary provisions enacted in response to the pandemic, scheduled increases in taxes, and other factors.
  • Changes Since CBO’s Previous Projections. CBO’s estimate of the deficit for 2020 is now $2.2 trillion more than the agency estimated in March 2020—mostly because of recently enacted legislation. CBO now projects a cumulative deficit over the 2021–2030 period of $13.0 trillion—$0.1 trillion less than the agency projected in March. That 10-year decrease is the net result of changes that go in opposite directions. Lower projected wages, salaries, and corporate profits, as well as recent legislation and other changes, increase deficits, but lower projected interest rates and inflation reduce them.

CBO Debt Projection

CBO Debt Projection September 2020

Federal debt in 2030 would equal 109 percent of GDP, nearly 30 percentage points higher than it was at the end of 2019. 

Mish

Comments (65)
No. 1-16
Quatloo
Quatloo

The U.S. will rank #3 in debt to GDP ratio.
I don’t hear any prominent voices communicating this problem.
Maybe we need another Ross Perot to get the message out.

Sechel
Sechel

Who wil have the courage to reverse the Republican tax cuts? Don't see how we slow the bleeding wihtout that. Too many give aways. Farm aid, Wall Spending. You'll never convince anyone to take a hit on entitlements when that level of corruption goes on

IA Hawkeye in SoCal
IA Hawkeye in SoCal

You forgot the HUGE difference for us vs. the rest of the world: The United States has a printing press, that is secured by Aircraft Carriers, that protect the oil and our petrodollar. The dollar is still the worlds pimp-player-baller-shotcaller. Only a major war will change that.

PecuniaNonOlet
PecuniaNonOlet

60 days till election.

TimeToTest
TimeToTest

Those projections seem like a pipe dream to me. I wonder what the 2005 projections were for 2020?

Zardoz
Zardoz

Yuuuuuuge deficit! Everyone is saying it’s the biggest ever! MAGA!

Tony Bennett
Tony Bennett

"CBO projects a federal budget deficit of $3.3 trillion in 2020, more than triple the shortfall recorded in 2019."

...

A KEY point with CBO projections. They make no assumptions and reports based on current legislation. FY20 ends September 30 ... probably too late for next stimulus to show ... but if passed in next 10 days? With some of the $$s expedited? It could easily bump up current year deficit.

njbr
njbr

And a coincident marker

189,696 KIA dead US soldiers WW2
189,964 dead in coronavirus epidemic 9/2/2020

Deficits and deaths.

But the WW2 deficit was for the entire war.

And we have more to go with the pandemic.

Rocky Raccoon
Rocky Raccoon

Where is the Tea Party? AWOL.

They must not have been very serious eight years ago after all.

lol
lol

And with nothing to show for it,just like Obama,Trump and Obama,Dumb n Dumber,these 2 sorry ass clowns pumpin trillions into Wall Street while the economy goes completely to shit!

FromBrussels
FromBrussels

Debt to GDP 98% ? GREAT ! In Japan it s over 200% You still got some leeway.....Keep on monetizing folks !

AWC
AWC

Costs more to mint a nickel, than to print a hundred dollar bill. Doesn’t cost any more to print a trillion dollar bill. Costs virtually nothing to digitally create a trillion dollars, or quadrillions for that matter. So create they will. Why? Because they can.

mrutkaus
mrutkaus

Only half kidding here--maybe this debt can be used to make a precise prediction. I.E., Trump ran lots of businesses into the ground. What I am not sure of, is what he did with what was left? That is perhaps what happened with the business he bankrupted will happen to the country.

If someone can describe that a bit, we might know what the US will look like in a year or four.

Hdan
Hdan

This is evidence of the terrible leadership, at all levels of government, unwittingly working together to kill our country, one bad decision at a time.

Kimo
Kimo

A failed promise of Trump's. Somehow overlooked by Dems, it's Trump's most vulnerable chink in his armor.


Global Economics

FEATURED
COMMUNITY