The federal deficit for fiscal year 2020 was $3.1 trillion, or 14.9% of gross domestic product, the Congressional Budget Office reported Monday, the largest as a share of the economy since World War II.
During the war, deficits ballooned to 26.9% of GDP in 1943, but after the war ended, deficit levels dropped precipitously. It wasn’t until the Great Recession that deficits increased to 9.8% of GDP in 2009 before returning to low single digits.
For comparison, deficits for fiscal years 2019 and 2018 were 4.6% and 3.8% of GDP, respectively.
The deficit for fiscal year 2020 was far higher than expected at the beginning of the year and much larger than the $984 billion deficit the year before.
During the first six months of fiscal year 2020, the deficit totaled $700 billion but rose by $2.4 trillion in the second half of the fiscal year.
The huge increase in the deficit was due to the federal response to the coronavirus pandemic. Congress passed four major pieces of legislation that provided assistance to workers and families, small businesses, and state, local, and tribal governments.
The federal debt held by the public, representing the accumulated deficits, rose to 100.1% of GDP, up from 79.2% of GDP at the end of fiscal year 2019.
Revenue collected in 2020 amounted to $3.4 trillion, or $42 billion (1%) less than receipts recorded the previous year. Revenues were 16.3% of GDP, which was roughly the same as in 2019, but they remained below the average of 17.3% over the past 50 years.
Part of the reason for lower revenues was the higher unemployment rate. Revenue from individual income taxes was 6.4% lower on the year. Corporate tax receipts were also 8% off.
Meanwhile, spending soared.
Spending in 2020 was 47% higher than the year before. Large increases in spending were mostly linked to the pandemic and the federal government’s response to it. For example, spending on unemployment compensation was $445 billion more than in previous years. Spending for Medicare increased by 19.3%.
The CBO projects that deficits will stay high. The federal government recorded a deficit of $284 billion in October, which is $149 billion more than the shortfall recorded in the same month last year.
