U.S. budget deficit shrinks to $2.5 trillion in first ten months of fiscal 2021

The U.S. budget deficit narrows to $2.5 trillion in the first ten months of the fiscal year, down from $2.8 trillion in the same time last year, as the economy recovers from the pandemic and tax revenue increases.

The Treasury Department said Wednesday that 10-month spending increased by 4% to a record $5.9 trillion. Pandemic-related expenditures like tax rebates, extra unemployment compensation, emergency small-business loans, and stimulus cheques to consumers have increased spending.

The federal revenue during the time increased 18 percent over the same period the previous year to a record $3.3 trillion, according to the Treasury Department.

The July deficit compared to a $63 billion budget gap the prior year. Receipts for the month totaled $262 billion, a 54% decrease from July 2020, while outlays totaled $564 billion, a 10% decrease from the previous year.

The reduced year-to-date outlays and deficits, according to a US Treasury official, include some tapering of COVID-19 relief expenditure, with Labor Department outlays for supplementary unemployment benefits down 8% to $359 billion and Small Business Administration outlays down 40% to $338 billion, Reuters reported.

While revenue is increasing as consumer and company spending increases and businesses add employment, supply-chain issues and a labor shortage for lower-paying positions are stifling economic development.

The nonpartisan scorekeeper for Congress discovered last week that the approximately $1 trillion infrastructure plan that looks to be on the verge of passing would increase the federal budget deficit by $256 billion over ten years.

According to the CBO, the federal budget deficit for this fiscal year will be around $3 trillion.

The CBO's fiscal 2021 deficit forecast is at 13.4 % of GDP, down from 14.9 % in fiscal 2020. The deficit is expected to shrink considerably to $1.153 trillion, or 4.7 % of GDP, in fiscal 2022, and $789 billion, or 3.1 %, in fiscal 2023, the report stated.

With inputs from WSJ