WASHINGTON (CN) — The federal budget deficit will hit $2.3 trillion this year, even without President Joe Biden’s proposed stimulus package, the nonpartisan Congressional Budget Office reported on Thursday.
The shortfall is the second largest since World War II, only surpassed by last year’s deficit, which ballooned to $3.13 trillion after Congress passed massive federal aid packages due to the Covid-19 pandemic.
“Those deficits, which were already projected to be large by historical standards before the onset of the 2020–2021 coronavirus pandemic, have widened significantly as a result of the economic disruption caused by the pandemic and the enactment of legislation in response,” the CBO report said.
Congress passed the $2.2 trillion CARES Act last March and approved another $900 billion in December.
The report does not take into account the Biden administration’s proposed $1.9 trillion stimulus package. It also assumes the temporary tax cuts passed in 2017 will expire and add more revenue to the government’s coffers.
Although stronger economic growth prevented a much higher deficit outlook, the next stimulus package could cause the CBO to revise its prediction.
The projections are part of a 10-year economic outlook regularly released by Congress’ budget arm.
The agency expects the economy to return to pre-pandemic levels by the middle of this year and cause deficits to recede slightly until 2024, when they will rise again to pay for increased costs in Social Security and Medicare.
Unemployment, on the other hand, may recover much slower.
“The unemployment rate gradually declines through 2026, and the number of employed people returns to its pre-pandemic level in 2024,” the CBO said.
Several years of deficits have ballooned the nation’s federal debt to $21.8 trillion. Last year, the total debt surpassed the gross domestic product. By 2031, the CBO predicts, the debt will equal 107% of GDP — the highest in U.S. history.
Budget hawks bristled at the report on Thursday.
“This report is a stark reminder of the long-term fiscal challenges that already existed before we were hit by Covid, and have now grown worse,” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget. “The national debt will hit a new record and will grow indefinitely from there. If that doesn’t concern you, you aren’t paying attention.”
“We understand and share the desire to make vital public investments and address income inequality,” she added. “But we shouldn’t ask our kids to bear the cost of all this when we are already leaving them a record mountain of debt.”
Shai Akabas, the economic director at the Bipartisan Policy Center, expressed similar worries.
“When it comes to recovery, the country faces many challenges that are likely to require an infusion of federal resources,” he said. “But it is crucial that lawmakers balance any new investment with a commitment to stabilizing the precarious fiscal picture that CBO highlighted today. In this realm, ‘wait and see’ is not a strategy — it is a fiscal risk.”