The Congressional Budget Office says that the federal budget deficit will again hit $3 trillion this year, $745 billion more than its estimate five months ago, as it takes into account the cost of President Joe Biden's $1.9 trillion coronavirus rescue plan.
In an updated forecast Thursday, the CBO said the deficit for the current 2021 budget year, which ends Sept. 30, will be the second-largest in history, coming in shy of last year's record shortfall of $3.13 trillion.
Federal debt, meanwhile, will rise to 102.7% of the total economy this year from 100.1% last year, according to the CBO forecast. This year's number would eclipse last year's as the highest debt level since the end of World War II.
The deficits in both years have been inflated by the trillions of dollars in support Congress passed at the urging of both the Trump and Biden administrations to combat a deep recession triggered by the COVID pandemic.
The CBO estimates that, with the economy improving as vaccines are distributed and the country re-opens, the deficit for the 2022 budget year will drop to $1.15 trillion. That would still be $97 billion higher than the deficit the CBO estimate back in February.
The updated CBO estimates are the first the agency has issued since Biden succeeded in pushing a $1.9 trillion relief package through Congress in March. That measure sent economic stimulus payments of up to $1,400 per individual to millions of Americans and provided additional help to small businesses and the unemployed.
The new CBO report is based on current law and does not include the impact of two infrastructure measures that Biden is hoping to get Congress to enact. The measures include a proposal costing roughly $1 trillion that has bipartisan support to boost spending on traditional infrastructure programs such as roads and bridges, and another measure Biden and Democrats are pushing for $1.8 trillion to increase spending for such things as early childhood education and community college tuition.
The new CBO estimates project that the annual budget deficits will be above $1 trillion over the next decade except for a brief three-year period from 2023 through 2025 when the annual deficits will come in below that level.
Republicans lawmakers are certain to use the new CBO report to argue that Democrats' spending plans are too costly at a time when the economy is recovering.
Mayra MacGuiness, president of the Committee for a Responsible Budget, said in a statement that “the strong economic growth projections from CBO show that it is time to pivot away from further deficit financing and towards paying for things and, ultimately, decreasing the national debt from its current path.”
The CBO sees the economy growing a strong 7.4% this year when compared to the fourth quarter of last year, up from a February forecast of GDP growth of 3.7% this year.