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The US budget deficit climbed to an all-time high in 2020, due to spending to help the economy cope with the crisis caused by Covid-19. It exceeds $ 3 trillion, far beating its previous record.
The federal state deficit for the 2020 fiscal year ended in September reached 3,132 billion dollars, against 984 billion in 2019, i.e. a tripling, the US Treasury revealed on Friday (October 16). It is by far the largest deficit ever recorded by the United States, since it is more than double the previous record.
The year 2020 therefore dethrones 2009, when, in the midst of a recession linked to the financial crisis, the deficit had climbed to 1.4 trillion dollars. The accounts of the world’s largest economy have thus been weighed down by the explosion in public spending, which has “considerably increased”, underlines the Treasury in its press release. They jumped 47% to reach 6.5 trillion dollars.
The month of March had indeed seen the Covid-19 spread on American territory. Workers who could were then forced to work from home, while shops and restaurants had to close, laying off, at least temporarily, their employees.
The White House and Congress had urgently adopted a $ 2.2 trillion stimulus plan, extended by $ 500 billion in April, and which included, among other things, direct checks to Americans, additional aid for the unemployed, and even more. loans to help small and medium-sized businesses continue to pay salaries.
Millions of layoffs
However, these measures did not prevent tens of millions of redundancies, pushing unemployment benefits to unprecedented levels, the rights of which had also been opened to other workers, the self-employed in particular.
As a result, the Department of Labor’s spending reached $ 477.5 billion in 2020, or $ 441.1 billion more than expected. “This increase is mainly due to higher spending on unemployment insurance,” said the Treasury in its press release.
The unemployment rate, which was 3.5% in February, peaked at 14.7% in April. As for receipts, they too have helped drive up the deficit. They have decreased very little compared to 2019, but the federal government initially thought it could raise a little more money. But the unexpected drop in income for millions of businesses and Americans reduced the amount of taxes they paid.
A new recovery plan
The deficit had already risen sharply in 2019, approaching $ 1 trillion at a time when the US economy was at its best after ten years of growth. Not surprisingly, the debt is also increasing, reaching $ 26.9 trillion at the end of September.
For now, the government can count on a contained cost of debt thanks to interest rates close to zero. But in the long term, debt servicing risks translating into lower budgets for education or social programs, economists warned.
However, Donald Trump, during his presidential campaign in 2016, called himself “the king of the debt”, vehemently criticizing the supposedly too large spending by the Democrats under the Obama administration.
The Trump administration and the Democrats have been discussing for three months, in an attempt to adopt a new stimulus package, which faces deep disagreements between the two camps in particular on its amount, which will constitute an additional burden on the state budget .