The US budget deficit has moved into previously uncharted territory in recent months. In particular, June’s Treasury report revealed an $864 billion overage, crushing the previous 2020 high of $738 billion in April.
The dramatic sums during the past few months have added to the already burgeoning deficit. The budget year, beginning Oct 1 is already $2.7 trillion overdrawn, and well on the way to the $3.7 trillion forecasts.
US Budget Blow Out
The totals are already well beyond the previous highs during the recession of 2009. In that year, the government overspent by $1.4 trillion—a previous high.
That year saw dramatic spending initiatives to stem the fiscal crisis caused by mortgage-backed securities. The current spending has already nearly doubled that total, with three additional full months still left to spend.
Times of War
The deficits are largely composed of the stimulus and economic-supporting initiatives caused by the COVID-19 crisis.
These figures, as a percent of Gross Domestic Product (GDP), are nearly at the level experienced at the start of WWII. That year had previously been the highest budget deficit ever seen in the U.S.
Spending to Survive
The argument from the U.S. Treasury has essentially been that the country will not survive without substantial stimulus. This, coupled with reduced spending, has left the U.S. government between a rock and a hard place.
The need for liquidity has driven the stimuli. However, the subsequent pressure on the deficit has left many economists wondering how the fallout will eventually affect the nation.
Treasury Secretary Mnuchin has already indicated that another shutdown is ‘impossible’. With states like California threatening further action, the Treasury may have no options left, and the future remains uncertain.