US Budget Deficit to Soar to a Peacetime Record of 17.9 Percent of GDP

That's the budget of a Banana Republic

The deficit will still be 9.8 percent of GDP in 2021

Today, the Congressional Budget Office (CBO) released a blog post outlining its latest projections of near-term federal debt and deficits in the wake of the novel coronavirus (COVID-19) pandemic. These projections are an update to those in CBO’s March baseline, which do not incorporate the effects of COVID-19. CBO’s projections are very close to our own estimates published on April 13, in which we project this year’s budget deficit will total $3.8 trillion and that debt will eclipse the size of the economy by the year’s end.

Specifically, CBO notes that:

  • CBO projects the federal budget deficit will total $3.7 trillion (17.9 percent of GDP), a $2.6 trillion increase compared to the March 2020 projection of $1.1 trillion (4.9 percent of GDP).
  • The agency expects debt as a share of the economy, to reach 101 percent by the end of this fiscal year, whereas it projected debt would end the year at about 81 percent of GDP in the March baseline.
  • CBO projects that interest rates on 3-month Treasury bills and 10-year Treasury notes will average 0.1 percent and 0.6 percent, respectively during the second quarter of 2020; in January, CBO projected rates would average 1.6 percent and 1.9 percent, respectively.
  • The agency expects the unemployment rate to average 14 percent during the second quarter of 2020 and 11.4 percent during calendar year 2020 before falling slightly to 10.1 percent in 2021.
  • CBO projects GDP will fall by 11.8 percent this quarter and 5.6 percent in 2020, before growing by 2.8 percent in 2021. GDP at the end of 2021 will remain lower than it was in 2019 and well below prior projections.

In crafting its near-term debt and deficit projections, CBO accounts for the budgetary effects of the four pandemic-related relief bills enacted by Congress over the past two months and makes a rough estimate of the changes in federal spending and revenue brought on by the sharp downturn the U.S. economy has experienced since January.

Importantly, CBO emphasizes that these projections are highly uncertain and will continue to change as the pandemic unfolds further.

Source: Committee for a Responsible Federal Budget


With the expected weakness in economic output and the larger federal deficits, the deficit would be 17.9 percent of GDP in 2020 and 9.8 percent of GDP in 2021, CBO projects, compared with 4.6 percent in 2019. 

  1. Charles Homer says

    Here is an article that looks at the impact of the COVID-19 pandemic on America’s Social Security safety net:

    Unless Washington moves quickly to address this financial imbalance, Americans of all ages will find themselves impacted by higher taxes, dramatic decreases in government-funded retirement and disability benefits or some combination of the two.

  2. Sharon Marlowe says

    You lost me at “peacetime”.

    1. UkraineTiger says

      Yeah, that part got me too. That means the only way to get the deficit down is to start another major war. Of course it hasn’t worked previously but hey, the bankers are happy.

      1. David Bedford says

        After WW2 had long died down the Bush crime family were getting antsy for more bloodshed so they conjured up 9/11 and had simulated planes flying into the Twin Towers and then link to Saddam Hussein as being responsible when the world knows 14 of the 19 hijackers were from Saudi Arabia, America got their forever wars but it came at the weakening of the US empire which gave room for Russia and China to rise and for it to become a multipolar world.

    2. disqus_3BrONUAJno says

      Peacetime is any time we aren’t engaged in a full scale hor war.

  3. chris chuba says

    Yeah but if we drive interest rates close to 0% then the debt service is manageable regardless of how irresponsible we are. Not advocating this but this looks like the game we are playing. The fed is keeping the annual debt service below $400B no matter what happens.

    1. disqus_3BrONUAJno says

      The Fed’s rate is 0%.
      The Fed’s debt service is much closer to $400 trillion than it is $400 billion, regardless of their annual claims.

  4. Natural_Texan says

    The evil of public debt and it’s companion debt service to private banks and even foreign entities is that it obligates dollars from the US economy and Taxpayers for whatever purposes the lender chooses. Taxpayers and Policymakers and Congress have zero say in how and where those monies are employed. Some estimates are service and interest of US debt will reach and exceed $1 Trillion soon. At the extreme of this vicious cycle could be a US Super Carrier sunk by a Chinese hyper-sonic re-entry vehicle (not a likely or hopeful thing) with the inscription ‘Paid for by US Taxpayers’..

  5. cechas vodobenikov says

    US has fake people—a fake economy, entirely dependent on borrowing and imports—a one dimensional economy —service industry comprised of illiterate baristas and waitresses and financial services that create fake money w stock buy backs, junk bonds, Calvinist credit cards, etc—-the empire will collapse soon….not a concern of amerikans today—nearly all of whom now copulate with mobile phones–

  6. disqus_3BrONUAJno says

    A banana republic isn’t so because of its debt or spending.
    America’s economy is too diverse to be commanded by a single commodity, such as bananas.

    1. UkraineTiger says

      Correct, it is commanded by an orange

  7. voza0db says

    I also freeze at “Peacetime”!

    Are you guys on drugs, or what?!

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