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The economic disruption caused by the coronavirus (COVID-19) pandemic and the federal government’s response to it has widened the gap between federal outlays and revenues. The growth in outlays has been driven by legislative actions, particularly provisions in the Coronavirus Aid, Relief, and Economic Security Act such as Economic Impact Payments, the Paycheck Protection Program, and additional unemployment compensation.
At the same time, revenues have fallen largely due to a sharp decline in economic activity, recently enacted legislation, and administrative actions including postponing the tax-filing deadline. While much of those deferred revenues will be collected in the future, some will be permanently lost due to businesses becoming insolvent and individuals losing their jobs.
The rapid increase in the gap between revenues and outlays 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.
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