Back in September, the Treasury released its fiscal 2020 final numbers with a record-breaking $3.1 trillion deficit – which is three times as much compared to the year prior, and outlays reaching a staggering $6.552 trillion. Now however, it appears that the first month of fiscal 2021 is certainly not an improvement, as October’s budget deficit came out to be the largest October deficit in history.
According to latest data released by the Congressional Budget Office (CBO), the budget deficit for the month of October has already reached $284 billion, which is $10 billion more than initially anticipated, and twice as much as last year’s October deficit of $134.5 billion. In the meantime, revenues fell by $8 billion, which was largely due to a drop in individual income tax collection. Likewise, outlays for October increased by 37% from the year prior to $141 billion, predominantly fuelled by increased spending on government programs.
To put the latest October numbers into context, the 2020 fiscal year budget deficit ended at $3.1 trillion, which amounts to 14.9% of America’s total GDP and the largest since 1945. However, the largest portion of the deficit was accumulated during the second half of the year, mostly in response to pandemic-mitigation efforts. Some of the largest spending categories in 2020 were Medicare with $96 billion, Social Security with $93 billion, followed by National Defence, Income Security, and Health at $80 billion, $73 billion, and $63 billion, respectively.
In short, the first month of the fiscal 2021 year is certainly not off to a good start, and will serve as a precursor of the debt levels that will likely accrue over the coming months. Total US debt, which has already surpassed $27.1 trillion, will be pushed well over $30 trillion over the next 12 months, especially in the event of another stimulus package.
Information for this briefing was found via the CBO. 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.