The numbers: The U.S. federal budget deficit widened to a record $1.9 trillion in the first seven months of the fiscal year, the Treasury Department said Wednesday. This is up from a $1.5 trillion deficit over the same period last year.
Spending was higher as the government continued to support Americans impacted by the pandemic.
The deficit was $226 billion in April, down from $738 billion in the same month of 2020. Last April, the government sent out the first round of COVID stimulus checks to Americans.
What happened: For the first seven months of the 2021 fiscal year, which ends Sept. 30, receipts were up 16% while outlays rose 22%.
In April, receipts were up 82% while outlays were down 32%. Last year, the government delayed all tax payments until July. This year, only individual tax payments were delayed.
Big picture: The U.S. budget deficit this year is expected to exceed last year’s record $3 trillion deficit. The Committee for a Responsible Federal Budget, an independent think tank, said it expects the deficit this year to total $3.4 trillion. Over the next 10 years, the group projects a deficit of $16.6 trillion. At the same time, the national debt is seen growing to $37.4 trillion from $28 trillion currently.
Federal Reserve Chairman Jerome Powell said last month the federal budget deficit is on an unsustainable path.
“As a nation, we will have to get back to a sustainable path…but this is not the time to prioritize that concern,” he said during a discussion at the Washington Economic Club.
Market reaction: The yield on the 10-year Treasury note
rose to 1.676 on Wednesday on the back of strong inflation readings for April. Stocks
were sharply lower.