The numbers: The US government posted a $ 141 billion budget deficit in December, and the gap is likely to widen further in the coming months after Washington approved more federal aid for the economy. The deficit increased last month from just a $ 13 billion budget gap in the same month of 2019, the Treasury Department said Wednesday.
US budget deficit climbs to $ 144 billion in December
The budget gap in the first three months of the current fiscal year was 61% higher compared to the previous year: $ 573 billion versus $ 357 billion. The increase in the deficit almost entirely reflects an increase in public spending to try to keep the economy afloat until the coronavirus pandemic fades. Washington has spent billions on stimulus checks for families, more generous unemployment benefits and grants for struggling businesses. Read: America lost 140,000 jobs in December. How bad was it? What happened: Tax revenue increased 3% in December to $ 346 billion from $ 336 billion a year earlier. The high level of taxes Washington is collecting is due to a strong rebound in the economy since the pandemic broke out last spring and the ability of most businesses to adapt. Tax revenue could slow again after a record spike in cases and more government restrictions on businesses. However, the new restrictions are not as widespread. Government spending was up 40% from the previous year to $ 490 billion in December. Most of the increase in spending last month was tied to health care and Social Security benefits. The federal government is spending more on coronavirus vaccines and related treatments. Read: Restaurants cut another 372,000 jobs in December Big picture: Historically large budget deficits are expected to persist for some time. Last month, Washington approved nearly $ 1 billion in new aid for the economy, and President-elect Joe Biden promised that even more aid is on the way. The deficit exceeded $ 3 trillion in the fiscal year ending September 30. It was the largest deficit as a percentage of gross domestic product since 1945. The deficit was expected to be cut in half in the current fiscal year, according to the Congressional Budget Office. But that will depend on the actions taken under the new Biden administration Market reaction: The yield on the 10-year Treasury note TMUBMUSD10Y, 1,090% exceeded 1% in early January for the first time since the beginning of the pandemic. Some Wall Street Investors DJIA, + 0.17% are concerned that high deficits will cause inflation to rise, but prices are low and likely to stay that way until the economy is close to a full recovery.