Sep 2, 2020 - Economy

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

Axios

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."

Federal spending has jumped to 32% of GDP this fiscal year after Congress spent trillions of dollars in coronavirus relief.
Negotiations for the next stimulus package have continued to stall, as tens of thousands of Americans remain without a job.

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.

Add Axios on Google

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

What to read next