The Gap Between Federal Spending and Revenues Has Grown Rapidly During the Pandemic
The economic disruption caused by the coronavirus (COVID-19) pandemic and the federal government’s response to it has widened the gap between spending and revenues in the budget. The growth in spending has been driven by legislative actions, particularly provisions in the Coronavirus Aid, Relief, and Economic Security (CARES) Act such as Economic Impact Payments, the Paycheck Protection Program, and additional unemployment compensation.
Provisions in the CARES Act and the Families First Coronavirus Response Act also diminished revenues sharply by deferring some payroll taxes, creating tax credits for employers to retain workers and provide sick leave, and allowing greater use of losses to offset taxable income. The recent uptick in revenues mostly reflects activity that would have occurred earlier in the year if the Administration had not postponed the tax-filing deadline.
An Unsustainable Fiscal Future
The rapid increase in the gap between revenues and spending is not surprising given the devastating effects of the pandemic and the necessary fiscal response. However, the underlying structural gap is an issue that lawmakers will need to consider once the crisis has abated.
Learn more about the fiscal challenges that the U.S. was facing before the pandemic.
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Further Reading
National Debt Projected to Hit 175% GDP; Interest Totals $99 Trillion
Compared with the previous 30-year projections, spending will be higher, revenues lower, interest rates and interest payments elevated, and the national debt significantly larger.
Federal Healthcare Costs on Track to Reach $3.1 Trillion by 2036
Federal healthcare programs are among the fastest-growing drivers of federal spending, and their continued growth will put significant upward pressure on the national debt.
Quarterly Treasury Refunding Statement: Higher Borrowing Compared to Last Year
Key highlights from the most recent Quarterly Refunding include an increase in anticipated borrowing of $249 billion compared to the same period in the previous year.