Federal deficit to pass $3 trillion for second year, economic growth higher than expected
WASHINGTON — After a year of immense spending during the COVID-19 pandemic and ensuing economic downturn, the federal deficit is projected to hit $3 trillion for the second year in a row, according to the Congressional Budget Office.
While the 2021 deficit — registering at just over $3 trillion — is $126 billion smaller than the 2020 deficit, it is still nearly triple the $1.2 trillion deficit the government ran in 2019. With slight fluctuations by year, the CBO now predicts the US will continue to run about $1 trillion deficit per year over the next decade.
More: President Biden's budget proposal projects debt rising past WWII levels
The CBO projects that the U.S. economy will grow by 6.7% in 2021 and 5% in 2022, some of the fastest rates seen in decades. Inflation is expected to rise to 3% over the year, also a sharp rise.
The sharper rise in economic activity than the CBO predicted in February also led the agency to hike up its estimates for inflation and interest rates in the latest report.
Laern more: White House, Federal Reserve push back on inflation concerns as prices shift
Optimistic outlook on economic growth
On other economic metrics, the CBO's July report found positive trends for the American economy. The government agency found that inflation rose sharply in the U.S. then dropped off again as prices rose after coronavirus restrictions were lifted across the country.
The agency also took a more optimistic view of economic growth and expects "recently enacted fiscal policies to boost output," the over the year, likely a reference to the $1.9 trillion stimulus package passed by Democrats in late February.
The lifting of social distancing guidelines and a stronger consumer demand than expected are also now projected to buoy the economy.
Follow Matthew Brown online @mrbrownsir.
This article originally appeared on USA TODAY: Federal deficit expected to exceed $3 trillion again in 2021, CBO says
