The federal budget deficit topped $3.1 trillion in the 2020 fiscal year, the U.S. Treasury announced Friday, marking the largest annual deficit in U.S. history.
As a share of the economy, the deficit-to-GDP ratio rose to 16%, the highest level since 1945, the last year of World War II.
The huge increase from 2019’s nearly $1 trillion deficit was driven by the government’s response to the coronavirus pandemic, which included massive levels of income support for individuals and grants and loans for businesses. “Unprecedented times call for unprecedented deficits,” William Hoagland of the Bipartisan Policy Center told The Wall Street Journal. “Today’s deficit figure is the result of six months of fighting the pandemic and its economic fallout.”
In the 2020 fiscal year, which concluded at the end of September, the government spent about $6.5 trillion – roughly $2 trillion more than the $4.5 trillion spent in 2019. Revenues in 2020 came to $3.4 trillion, modestly lower than the year before.
The cost of servicing the national debt fell, however, thanks to low rates, with net interest costs dropping by nearly $31 billion, to $345 billion.
More deficits ahead: Although a new, trillion-dollar coronavirus package has been hung up in negotiations in Washington, some kind of relief bill is expected to pass in the next few weeks or months in an effort to prevent the economy from sliding backward.
But the economy is already in a difficult place as winter approaches, Brian Riedl of the conservative Manhattan Institute told The Washington Post, with much of the easy recovery already behind us. “The growth is leveling off. The economic recovery is leveling off,” he said. “Which means the deficit numbers will continue to be pretty bad.”