The federal budget deficit is on track to be the second largest since the end of World War II, a new study from the Congressional Budget Office is reporting.
In its Budget and Economic Outlook: 2021 to 2031 report, the CBO notes that deficits already in place in early 2020 have only “widened significantly as a result of the economic disruption caused by the pandemic and the enactment of legislation in response.”
The CBO is now forecasting historic annual deficits averaging around $1.2 trillion for every year leading up to 2031, exceeding an average of 3.3% of Gross Domestic Product in place since the early 1970s.
In fact, that figure is expected to stay at around 4% of GDP between 2023 and 2027, before heading upward again to 5 % by the year 2031.
Measured against the CBO’s last general predictions issued in September, the estimate for this year’s deficit is, at $448 billion, roughly 25% larger.
The CBO report is also predicting an increase in the federal debt, equaling 107%, which, says the document, would be the “highest in the nation’s history.”
Conversely, projected outlays relative to GDP are expected to decline if low interest rates prevail and the unprecedented federal spending on coronavirus relief efforts tapers off.
The agency also sees unemployment decreasing to 5.3% by the end of this year, down from a high of nearly 15% last spring.
In a somewhat bullish scenario, the CBO study additionally notes that GDP is expected to grow this year by some 3.7% as an “expanded vaccination reduces the spread of Covid-19.”
Moreover, growth will generally average around 2.6% in the next four years, with the unemployment rate gradually declining between now and 2026.
By Garry Boulard
