The U.S. budget deficit will be wider than previously forecast because of the $900 billion stimulus bill passed in December, the Congrssional Budget Office said Thursday.
The CBO forecasts that the federal government will borrow $2.26 trillion this year. That would make it the second-largest budget deficit in history, just behind last year’s. Last year’s $3.1 trillion was the biggest in absolute numbers and also the largest as a share of gross domestic product.
The figures do not take into account the $1.9 trillion spending plan the Biden administration has introduced. If passed, that would likely mean the 2021 budget deficit was even larger than last year’s.
The CBO estimates that federal debt held by the public, which hit 100 percent of GDP at the end of fiscal year 2020, will reach 102 percent of GDP at the end of 2021, dip slightly for a few years, and then rise further. By 2031, debt would equal 107 percent of GDP, the highest in the nation’s history.
The CBO projects GDP will grow by 3.7 percent in 2021, returning to its pre-pandemic level by the middle of the year, and afterward will grow an average of 2.6 percent over the following four years. After that the CBO forecasts GDP growth to averages 1.6 percent.
The Federal Reserve sees the economy growing much faster. At its December meeting, the median growth projection was 4.2 for 2021 and 3.2 next year. The median projection for the long-run average is 1.8 percent.