The federal government’s 2021 deficit, at $2.3 trillion, will be the second-largest annual deficit since World War II, the Congressional Budget Office projected Thursday.
While the fiscal year 2021 expected budget shortfall is projected to be roughly $900 billion less than the deficit in 2020, the projection only includes current legislation. If the $1.9 trillion coronavirus relief package making its way through Congress is passed in full, the deficit could skyrocket to beat even last year’s deficit.
The projected deficit is $450 billion larger than the budget office projected in September. Yet projected deficits over the next 10 years were adjusted lower by $345 billion thanks to improved economic conditions. The report found that “the costs of recently enacted legislation are partially offset by the effects of a stronger economy.”
“In subsequent years, the largest changes stem from revisions to the economic forecast,” the report reads. “CBO now projects stronger economic activity, higher inflation, and higher interest rates, boosting both revenues and outlays — the former more than the latter.”
The CBO released a portion of its economic outlook last week and projected that the economy would expand as much as 3.7% in 2021, the fastest growth in years. Growth is expected to average at 2.6% over the next five years.
The report also projects that the government will continue to rack up annual deficits in excess of $1 trillion through 2031, increasing to as much as 5.7% of gross domestic product in 2031. The projected $2.3 trillion 2021 shortfall, by comparison, is 10.3% of GDP. The annual deficit in 2020 was more than 14%.
The total federal debt, already at 100% of GDP, is expected to swell in 2021 to 102% before dipping for a few years. But by 2031, total debt is expected to hit 107% of GDP, the highest debt-to-GDP the country has ever experienced.
