The US posted its second-highest ever budget deficit in September. The budget deficit for the world’s largest economy totalled $2.77 trillion for 2021. It was lower than last year which was the highest on record, totalling $3.13 trillion.
According to the Biden administration, the deficit for the budget year that ended September 30th was $360 billion lower than 2020. The reduction in the deficit was attributed to a recovering US economy, which is offsetting the government spending combatting the coronavirus.
The economic recovery in the US can be seen in the increase in GDP (Gross Domestic Product). As a percentage of gross domestic product, the 2021 deficit works out at 12.4% of GDP. In 2020, the deficit was 15% of gross domestic product.
Last year, the deficit was the highest since the second world war. Heavy borrowing to fund the war effort saw the US deficit reach 29.6% of GDP.
Government spending from 2020 to 2021 actually increased 4.1% to $6.82 trillion. However, the extra spending was offset by an 18.3% increase in government revnues to $4 trillion.
In a joint statement released on Friday, Treasury Secretary Janet Yellen and Shalanda Young, acting director of the Office of Management and Budget, said:
“Under President Biden’s leadership, the U.S. economy is getting back on track and Americans are getting back to work,”
“While the nation’s economic recovery is stronger than those of other wealthy nations, it is still fragile.”
“In order to build upon the progress that has been made … Congress should pass President Biden’s Build Back Better plan.”
US Budget Expected to Reduce Further
The non-partisan Congressional Budget Office forecast that the budget deficit will decline to $1.15 trillion in the current budget year, ending September 30th 2022.,
The deficit is then expected to fall below $1 trillion from 2023 through to 2025. It is then expected to rise again above $1 trillion from 2025 through to 2031.
