Although the Covid-19 pandemic is beginning to show signs of tapering off across the US (especially with the strong vaccine rollout), government stimulus spending looks like it is staying for good.
On Monday, the US Treasury published its latest monthly budget report for March, which showed the budget deficit swelled to $660 billion— up by nearly five-fold compared to the $119 billion documented in March 2020. The increase was primarily driven by a surge in government outlays, which rose from $355.7 billion a year ago to $927 billion— the third highest in history.
The jump in government spending is due to the latest stimulus checks that were distributed to households last month, following the signing of the $339 billion American Rescue Plan, which also included $87 billion in Payroll Protection Program loan forgiveness. Overall, the Biden administration spent approximately $453 billion on income security, followed by $94 billion on social security, $81 billion on Commerce and Housing Credit, and $71 billion on Health.
However, when compared to year-ago levels, the government has spent significantly more than it has brought in. For the fiscal year, the federal government spent $3.41 trillion— exactly 100% more than its incoming revenues. The six-month total puts the US budget deficit at $1.706 trillion, the highest on record.
Although it is feasible that the government will cut back on its spending now that the economic recovery is underway and American households have received the final round of stimulus checks, the probability that spending could increase if Biden’s infrastructure plans materialize in the coming months is just as high.
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Information for this briefing was found via the US Department of the Treasury. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
