Sep 3, 2020 - Economy & Business

U.S. debt to reach 100% of GDP in 2021

A cyclist passes Congress in Washington, D.C.

Photo: Stefani Reynolds/Getty Images

The federal budget deficit will reach $3.3 trillion in the fiscal year ending this month — more than triple the 2019 shortfall, the nonpartisan Congressional Budget Office (CBO) projected on Wednesday.

Why it matters: That would be 16% of GDP, the largest amount since the end of World War II in 1945. The national debt is projected to exceed 100% of GDP in 2021 and rise to 107% in 2023 — "the highest in the nation's history," the CBO notes.

Driving the news: The CBO attributed the rise mostly to the economic disruption caused by the coronavirus pandemic "and the enactment of legislation in response."

Our thought bubble, via Axios' Felix Salmon: The U.S. government can borrow at less than the rate of inflation, which is a sign from the markets that they’re encouraging higher government spending, higher borrowing and higher debt.

  • The Treasury will always be able to repay that debt, because it borrows in dollars and can print as many of those as it likes.

Of note: The deficit could have been worse. The CBO projected in April that it would jump to $3.7 trillion.

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