US deficit in June blows past all previous records

The government pumped money into propping up the economy as millions went under lockdown and lost their livelihoods.

    The June deficit in the United States was driven by spending on various government virus relief programmes such as an extra $600 per week in expanded unemployment benefits and the Paycheck Protection Program that provided support to businesses to keep workers on their payrolls [File: Mike Segar/Reuters]
    The June deficit in the United States was driven by spending on various government virus relief programmes such as an extra $600 per week in expanded unemployment benefits and the Paycheck Protection Program that provided support to businesses to keep workers on their payrolls [File: Mike Segar/Reuters]

    The United States federal government incurred the biggest monthly budget deficit on record in June as spending on programmes to combat the coronavirus recession exploded while millions of job losses cut into tax revenues.

    The US Department of the Treasury reported Monday that the deficit hit $864bn last month - a sea of red ink that surpasses most annual deficits in the nation's history and that eclipsed the previous monthly deficit record of $738bn set in April. That amount was also tied to the trillions of dollars in aid Congress greenlit to cushion the blow from COVID-19 lockdowns that ground entire sectors of the economy to a halt. 

    For the first nine months of this budget year, which began on October 1, the deficit totalled $2.74 trillion, also a record for that period. That puts the country well on its way to hitting the $3.7 trillion deficit for the whole year that has been forecast by the Congressional Budget Office (CBO).

    That total would surpass the previous annual record of $1.4 trillion set in 2009 when the government was spending heavily to lift the country out of the recession caused by the 2008 financial crisis.

    The June deficit was driven by spending on various government virus relief programmes such as an extra $600 per week in expanded unemployment benefits and the Paycheck Protection Program that provided support to businesses to keep workers on their payrolls.

    The report showed that the cost of the Paycheck Protection Program in June was $511bn. That reflected a charge to the government for all the bank loans made under the programme even though the government will not actually have to pay out funds until the banks determine whether the businesses met the criteria for having the loans forgiven. Those requirements include spending at least 60 percent of the loan amount on worker pay and having the other 40 percent go to overhead costs such as rent and utilities.

    Another reason for the surge in the June deficit was the government's decision to delay tax payments this year until July 15. That decision mean that quarterly payments made by individual taxpayers and corporations will not be due until July 15 this year instead of being due in June.

    So far this budget year, revenues total $2.26 trillion, down 13.4 percent from the same period last year, while spending totals $5 trillion, up 49.1 percent from a year ago.

    The CBO estimate of a $3.7 trillion deficit for this year could be even higher depending on the trajectory of the coronavirus pandemic and the economic rebound. The country fell into a deep recession in February, ending a record-long expansion of nearly 11 years. The administration of US President Donald Trump is predicting that the economy will come roaring back in the second half of this year, but many private forecasters are concerned that a resurgence of virus cases could make consumers too fearful to resume spending, which drives 70 percent of the economy.

    Congress, which has already approved more than $3 trillion in a series of rescue packages, is scheduled to debate another support effort when it returns from recess on July 20. Democrats are pushing for an extension of the expanded unemployment benefits which will soon run out.

    SOURCE: AP news agency