A comprehensive gauge of economic activity in the United States. The value of final products and services produced in the United States is measured by GDP (without double counting the intermediate goods and services used up to produce them). GDP changes are the most widely used metric of a country’s overall economic health.
What will the United States’ GDP be in 2021?
In addition to updated fourth-quarter projections, today’s announcement includes revised third-quarter 2021 wages and salaries, personal taxes, and government social insurance contributions, all based on new data from the Bureau of Labor Statistics Quarterly Census of Employment and Wages program. Wages and wages climbed by $306.8 billion in the third quarter, up $27.7 billion from the previous estimate. With the addition of this new statistics, real gross domestic income is now anticipated to have climbed 6.4 percent in the third quarter, a 0.6 percentage point gain over the prior estimate.
GDP for 2021
In 2021, real GDP climbed by 5.7 percent, unchanged from the previous estimate (from the 2020 annual level to the 2021 annual level), compared to a 3.4 percent fall in 2020. (table 1). In 2021, all major components of real GDP increased, led by PCE, nonresidential fixed investment, exports, residential fixed investment, and private inventory investment. Imports have risen (table 2).
PCE increased as both products and services increased in value. “Other” nondurable items (including games and toys as well as medications), apparel and footwear, and recreational goods and automobiles were the major contributors within goods. Food services and accommodations, as well as health care, were the most significant contributors to services. Increases in equipment (dominated by information processing equipment) and intellectual property items (driven by software as well as research and development) partially offset a reduction in structures in nonresidential fixed investment (widespread across most categories). The rise in exports was due to an increase in products (mostly non-automotive capital goods), which was somewhat offset by a drop in services (led by travel as well as royalties and license fees). The increase in residential fixed investment was primarily due to the development of new single-family homes. An increase in wholesale commerce led to an increase in private inventory investment (mainly in durable goods industries).
In 2021, current-dollar GDP climbed by 10.1 percent (revised), or $2.10 trillion, to $23.00 trillion, compared to 2.2 percent, or $478.9 billion, in 2020. (tables 1 and 3).
In 2021, the price index for gross domestic purchases climbed 3.9 percent, which was unchanged from the previous forecast, compared to 1.2 percent in 2020. (table 4). Similarly, the PCE price index grew 3.9 percent, which was unchanged from the previous estimate, compared to a 1.2 percent gain. With food and energy prices excluded, the PCE price index grew 3.3 percent, unchanged from the previous estimate, compared to 1.4 percent.
Real GDP grew 5.6 (revised) percent from the fourth quarter of 2020 to the fourth quarter of 2021 (table 6), compared to a fall of 2.3 percent from the fourth quarter of 2019 to the fourth quarter of 2020.
From the fourth quarter of 2020 to the fourth quarter of 2021, the price index for gross domestic purchases climbed 5.6 percent (revised), compared to 1.4 percent from the fourth quarter of 2019 to the fourth quarter of 2020. The PCE price index grew 5.5 percent, unchanged from the previous estimate, versus a 1.2 percent increase. The PCE price index grew 4.6 percent excluding food and energy, which was unchanged from the previous estimate, compared to 1.4 percent.
What is the current state of the US economy?
Retail and wholesale trade industries led the increase in private inventory investment. The largest contributor to retail was inventory investment by automobile dealers. Increases in both products and services contributed to the increase in exports. Consumer products, industrial supplies and materials, and foods, feeds, and beverages were the biggest contributions to the growth in goods exports. Travel was the driving force behind the increase in service exports. The rise in PCE was mostly due to an increase in services, with health care, recreation, and transportation accounting for the majority of the increase. The increase in nonresidential fixed investment was mostly due to a rise in intellectual property items, which was partially offset by a drop in structures.
The reduction in federal spending was mostly due to lower defense spending on intermediate goods and services. State and local government spending fell as a result of lower consumption (driven by state and local government employee remuneration, particularly education) and gross investment (led by new educational structures). The rise in imports was mostly due to a rise in goods (led by non-food and non-automotive consumer goods, as well as capital goods).
After gaining 2.3 percent in the third quarter, real GDP increased by 6.9% in the fourth quarter. The fourth-quarter increase in real GDP was primarily due to an increase in exports, as well as increases in private inventory investment and PCE, as well as smaller decreases in residential fixed investment and federal government spending, which were partially offset by a decrease in state and local government spending. Imports have increased.
In the fourth quarter, current dollar GDP climbed 14.3% on an annual basis, or $790.1 billion, to $23.99 trillion. GDP climbed by 8.4%, or $461.3 billion, in the third quarter (table 1 and table 3).
In the fourth quarter, the price index for gross domestic purchases climbed 6.9%, compared to 5.6 percent in the third quarter (table 4). The PCE price index climbed by 6.5 percent, compared to a 5.3 percent gain in the previous quarter. The PCE price index grew 4.9 percent excluding food and energy expenses, compared to 4.6 percent overall.
Personal Income
In the fourth quarter, current-dollar personal income climbed by $106.3 billion, compared to $127.9 billion in the third quarter. Increases in compensation (driven by private earnings and salaries), personal income receipts on assets, and rental income partially offset a decline in personal current transfer receipts (particularly, government social assistance) (table 8). Following the end of pandemic-related unemployment programs, the fall in government social benefits was more than offset by a decrease in unemployment insurance.
In the fourth quarter, disposable personal income grew $14.1 billion, or 0.3 percent, compared to $36.7 billion, or 0.8 percent, in the third quarter. Real disposable personal income fell 5.8%, compared to a 4.3 percent drop in the previous quarter.
In the fourth quarter, personal savings totaled $1.34 trillion, compared to $1.72 trillion in the third quarter. In the fourth quarter, the personal saving rate (savings as a percentage of disposable personal income) was 7.4 percent, down from 9.5 percent in the third quarter.
In 2021, real GDP climbed 5.7 percent (from the 2020 annual level to the 2021 annual level), compared to a 3.4 percent fall in 2020. (table 1). In 2021, all major subcomponents of real GDP increased, led by PCE, nonresidential fixed investment, exports, residential fixed investment, and private inventory investment. Imports have risen (table 2).
In 2021, current-dollar GDP expanded by 10.0 percent, or $2.10 trillion, to $22.99 trillion, compared to 2.2 percent, or $478.9 billion, in 2020. (tables 1 and 3).
In 2021, the price index for gross domestic purchases climbed by 3.9 percent, compared to 1.2 percent in 2020. (table 4). Similarly, the PCE price index grew 3.9 percent, compared to 1.2 percent in the previous quarter. The PCE price index climbed 3.3 percent excluding food and energy expenses, compared to 1.4 percent overall.
Real GDP rose 5.5 percent from the fourth quarter of 2020 to the fourth quarter of 2021 (table 6), compared to a 2.3 percent fall from the fourth quarter of 2019 to the fourth quarter of 2020.
From the fourth quarter of 2020 to the fourth quarter of 2021, the price index for gross domestic purchases grew 5.5 percent, compared to 1.4 percent from the fourth quarter of 2019 to the fourth quarter of 2020. The PCE price index climbed by 5.5 percent, compared to 1.2 percent for the year. The PCE price index increased 4.6 percent excluding food and energy, compared to 1.4 percent overall.
Source Data for the Advance Estimate
A Technical Note that is issued with the news release on BEA’s website contains information on the source data and major assumptions utilized in the advance estimate. Each version comes with a thorough “Key Source Data and Assumptions” file. Refer to the “Additional Details” section below for information on GDP updates.
How much debt does America have?
“Parties in power have built up the deficit through increased spending and poorer tax collection, regardless of political affiliation,” says Brian Rehling, head of Global Fixed Income Strategy at Wells Fargo Investment Institute.
While it’s easy to suggest that a specific president or president’s administration led the federal deficit and national debt to move in a given direction, it’s crucial to remember that only Congress has the power to pass legislation that has the greatest impact on both figures.
Here’s how Congress responded during four major presidential administrations, and how their decisions affected the deficit and national debt.
Franklin D. Roosevelt
FDR served as the country’s last four-term president, guiding the country through a series of economic downturns. His administration spanned the Great Depression, and his flagship New Deal economic recovery plan aided America’s rebound from its financial abyss. The expense of World War II, however, contributed nearly $186 billion to the national debt between 1942 and 1945, making it the greatest substantial rise to the national debt. During FDR’s presidency, Congress added $236 billion to the national debt, a rise of 1,048 percent.
Ronald Reagan
Congress passed two major tax cuts during Reagan’s two administrations, the Economic Recovery Tax Act of 1981 and the Tax Reform Act of 1986, both of which reduced government income. Between 1982 and 1990, Congress passed Acts that reduced revenue as a percentage of GDP by 1.7 percent, resulting in a revenue shortfall that contributed to the national debt rising 261 percent ($1.26 trillion) during his presidency, from $924.6 billion to $2.19 trillion.
Barack Obama
The Obama administration oversaw both the Great Recession and the recovery that followed the collapse of the mortgage market throughout his two years in office. The Economic Stimulus Act of 2009, which pumped $831 billion into the economy and helped many Americans avoid foreclosure, was passed by Congress in 2009. When passed by a strong bipartisan vote, congressional tax cuts added extra $858 billion to the national debt. During Obama’s two terms in office, Congress increased the national deficit by 74% and added $8.6 trillion to the national debt.
Donald Trump
Congress approved the Tax Cuts and Jobs Act in 2017, slashing corporate and personal income tax rates, during his single term. The cuts, which were seen as a bonanza for the wealthiest Americans and corporations at the time of their passage, were expected by the Congressional Budget Office to increase the government deficit by $1.9 trillion at the time of their passing.
The federal deficit climbed from $665 billion in 2017 to $3.13 trillion in 2020, despite the Treasury Secretary’s prediction that the tax cuts would reduce it. Some of the rise was due to tax cuts, but the majority of the increase was due to successive Covid relief programs.
The public’s share of the federal debt has risen from $14.6 trillion in 2017 to more than $21 trillion in 2020. The national debt is made up of public debt and intragovernmental debt (amounts owed to federal retirement trust funds such as the Social Security Trust Fund). It refers to the amount of money owed by the United States to external debtors such as American banks and investors, corporations, people, state and municipal governments, the Federal Reserve, and foreign governments and international investors such as Japan and China. The money is borrowed in order to keep the United States running. Treasury banknotes, notes, and bonds are included. Treasury Inflation-Protected Securities (TIPS), US savings bonds, and state and local government series securities are among the other holders of public debt.
“The national debt is growing at a rate it hasn’t seen in decades,” says James Cassel, chairman and co-founder of Cassel Salpeter, an investment bank. “This is the outcome of the basic principle of spending more money than you earn.” Cassel also points out that while both major political parties have spoken seriously about reducing the national debt at times, discussions and strategies have stopped.
When both sides pose discussing raising the debt ceiling each year, the national debt is more typically utilized as a bargaining chip. The United States would default on its debt obligations if the debt ceiling was not raised. As a result, Congress always votes to raise the debt ceiling (the maximum amount of money the US government may borrow), but only after parties have reached an agreement on other legislation.
Is the economy doing well right now?
Indeed, the year is starting with little signs of progress, as the late-year spread of omicron, along with the fading tailwind of fiscal stimulus, has experts across Wall Street lowering their GDP projections.
When you add in a Federal Reserve that has shifted from its most accommodative policy in history to hawkish inflation-fighters, the picture changes dramatically. The Atlanta Fed’s GDPNow indicator currently shows a 0.1 percent increase in first-quarter GDP.
“The economy is slowing and downshifting,” said Joseph LaVorgna, Natixis’ head economist for the Americas and former chief economist for President Donald Trump’s National Economic Council. “It isn’t a recession now, but it will be if the Fed becomes overly aggressive.”
GDP climbed by 6.9% in the fourth quarter of 2021, capping a year in which the total value of all goods and services produced in the United States increased by 5.7 percent on an annualized basis. That followed a 3.4 percent drop in 2020, the steepest but shortest recession in US history, caused by a pandemic.
What is the GDP of the United States in 2022?
According to our econometric models, the US GDP will trend around 22790.00 USD Billion in 2022 and 23420.00 USD Billion in 2023 in the long run.
In 2021, which country will have the greatest GDP?
What are the world’s largest economies? According to the International Monetary Fund, the following countries have the greatest nominal GDP in the world:
Which country owes the most money?
Venezuela has the highest debt-to-GDP ratio in the world as of December 2020, by a wide margin. Venezuela may have the world’s greatest oil reserves, but the state-owned oil corporation is thought to be poorly managed, and the country’s GDP has fallen in recent years. Simultaneously, Venezuela has taken out large loans, increasing its debt burden, and President Nicolas Maduro has tried dubious measures to curb the country’s spiraling inflation.
Who has the most US debt?
As of January 2022, Japan had $1,303 billion in Treasury securities, surpassing China as the largest foreign holder of US debt. 2 Holding U.S. debt is appealing due to Japan’s low and negative yield market. Japan owns 17% of all foreign-owned US debt.
In 2021, how much has the national debt increased?
The federal deficit in September 2021 was $59 billion, or about $65 billion (52 percent) less than in September 2020. This shortfall was the difference between $460 billion in revenue and $519 billion in spending. Despite the fact that individual and corporate tax payments normally result in a big surplus in September, COVID-19 relief spending outpaced them, resulting in a September deficit for the second year in a running.
In comparison to the same month previous year, revenues climbed by $87 billion (23%). A 23 percent increase in income and payroll taxes, as well as a 71 percent increase in corporate income tax receipts, accounted for the majority of the increase.
Spending increased by $22 billion (4%) year over year. The Department of Education’s budget was 107 percent greater than in September 2020. The department’s estimated net subsidy costs of loans and loan guarantees were revised upward by $95 billion, owing to pandemic-related factors such as the extension of pauses on loan principal and interest payments and the collection of loans in default, as well as re-estimates of how much the federal government would be repaid on its outstanding portfolio. The monthly enhanced Child Tax Credit payments allowed under the American Rescue Plan earlier this year increased spending on refundable tax credits by $21 billion year over year.
Some of this spending surge was mitigated in September by lower outlays on other pandemic-response initiatives. Outlays by the Department of Homeland Security decreased by 74% year over year, owing to the fact that certain payments, such as unemployment benefits, made through the Disaster Relief Fund in September 2020 were not repeated in 2021. The Department of Labor’s unemployment compensation was also 57 percent lower in September than last, due to the expiration of enhanced unemployment benefits early in the month.
Tracking the Federal Deficit: August 2021
According to the Congressional Budget Office, the federal government had a $173 billion deficit in August, the eleventh month of fiscal year 2021. Due to the fact that August 1 happened on a weekend this year, some substantial federal payments that are usually made on the first of the month were pushed back to late July. The August deficit would have been $233 billion, $60 billion higher than reported if not for the time shift. When compared to previous August, monthly revenues grew by 20% ($45 billion), owing to higher income and payroll tax receipts. Changes in pandemic response funding drove a 4% rise in spending ($17 billion) year over year.
The federal government has a $2.7 trillion cumulative deficit this fiscal year, which is the difference between $3.6 trillion in revenue and $6.3 trillion in spending. This deficit is 10% lower ($295 billion) than the same period in FY2020, but it is more than 150 percent larger ($1.6 trillion) than the FY2019 deficit at this point in the year.
Analysis of Significant Trends: With one month until the end of fiscal year 2021, the federal government is on track to post a somewhat lower deficit than last year. Revenues have risen as the economy has improved, but outlays have slowed as several significant pandemic relief programs have been phased out.
Year-to-date, revenues in 2021 have climbed 18 percent ($539 billion) over those in 2020. Revenues from corporate taxes are up 77 percent ($125 billion) year over year. Individual income tax receipts have rebounded this year after dropping from 2019 to 2020, gaining 26% ($382 billion) over the same 11-month period in 2020.
In comparison to the first 11 months of FY2020, total year-to-date outlays climbed 4% ($245 billion), with high expenditure levels led by COVID-19 alleviation measures. While federal spending in reaction to the epidemic lasted the entire fiscal year of FY2021 (as opposed to about three-quarters of FY2020), part of it reduced year over year. Outlays by the Small Business Administration are down 44% ($256 billion) from the same period last year, owing to a gradual decline in spending on pandemic assistance programs like as the Paycheck Protection Program and Economic Injury Disaster Loan program. Unemployment compensation spending was down 14% ($61 billion) from the previous year, as the economy added back jobs lost in 2020 and some states stopped extended unemployment benefits early.
Total spending through August, on the other hand, was up 52% ($2.1 trillion) from the same period in FY2019. Certain pandemic response measures, such as accelerated Child Tax Credit payments, Coronavirus Relief Fund payments to state and local governments, and emergency rental relief, have contributed to elevated spending levels in recent months.
Tracking the Federal Deficit: July 2021
According to the Congressional Budget Office, the federal government had a $301 billion deficit in July, the tenth month of fiscal year 2021. Due to the fact that August 1 fell on a weekend in both 2020 and 2021, many federal programs that usually pay out big sums on the first of the month did so twice in July. The deficit would have been $60 billion lower last month if not for these scheduling shifts. The gap between $261 billion in revenue and $562 billion in spending resulted in the July deficit. Due to the restoration to the traditional April and June tax filing deadlines for individual and corporate tax payments in 2021, monthly receipts fell 54 percent ($302 billion) from last July. (Those dates were pushed out until July 2020.)
The federal government has a $2.5 trillion cumulative deficit this fiscal year, which is the difference between $3.3 trillion in revenue and $5.9 trillion in spending. This deficit is 10% smaller ($269 billion) than the same period in FY2020, but nearly three times more ($1.7 trillion) than the FY2019 deficit.
Analysis of Significant Trends: Fiscal trends during the last month continue to reflect the federal government’s response to the COVID-19 outbreak, as well as the economy’s evolving recovery.
Revenues from the federal government have increased by 17% ($494 billion) over the same 10-month period in FY2020. This rise reflects a strengthening economy, with sustained inflows of individual income and payroll taxes from greater overall wages and salaries, as well as corporate taxes from higher profits, which grew by 76 percent ($121 billion) year over year.
In comparison to the first ten months of FY2020, total year-to-date outlays increased by 4% ($225 billion), mostly to pandemic-relief activities. The American Rescue Plan Act of 2021 increased spending for economic impact payments and refundable tax credits by $318 billion (79 percent) this fiscal year. Furthermore, expenditures from the Coronavirus Relief Fund surged by $62 billion (42%) year over year. Medicare spending, on the other hand, fell by 12% ($76 billion) from the same month in FY2020, as the expansions implemented by the Coronavirus Aid, Relief, and Economic Security Act of 2020 raised spending in July but have since evaporated. COVID-19 relief measures have had a long-term impact on the federal budget, with total outlays this year still 57 percent ($2.1 billion) more than in FY2019.
Finally, the federal government paid $10 billion more in interest on the public debt last month than it did in July 2020, owing to increased inflation and growing debt.
Tracking the Federal Deficit: June 2021
According to the Congressional Budget Office, the federal government had a $173 billion deficit in June, the ninth month of fiscal year 2021. The difference between $450 billion in revenue and $623 billion in spending was $450 billion in June’s deficit.
The federal government has a $2.2 trillion cumulative deficit this fiscal year, which is the difference between $3.1 trillion in revenue and $5.3 trillion in spending. This deficit is over three times larger ($1.5 trillion) than the same period in FY2019, but it is 19 percent smaller ($508 billion) than the same period in FY2020. The cumulative deficit has dropped year over year for the first time in FY2021.
Year-over-year comparisons of deficit levels in FY2021, so far, have mostly reflected the trajectory of the COVID-19 epidemic and the following federal response. This trend is expected to continue through the rest of the fiscal year, according to BPC.
A significant rise in revenues was the primary force behind the year-over-year decrease in the cumulative deficit through June. In comparison to FY2020, total receipts grew 35 percent ($797 billion) in the first nine months of this year, with a 30 percent increase ($589 billion) in individual income and payroll tax revenues and a 192 percent increase ($176 billion) in corporate income tax revenues. These changes, on the other hand, are mostly due to earlier tax payment deadlines in FY2020, which were pushed back until July. Revenues so far this fiscal year are up 17% from the same period last year ($448 billion), thanks in part to increasing worker wages and salaries, particularly among higher-income persons who pay the majority of federal income taxes.
In June, total spending was $623 billion, down $482 billion from June 2020. The Small Business Administration’s major COVID-19 relief obligationssuch as the Paycheck Protection Programaccounted for about half of government spending in June 2020, following the Coronavirus Aid, Relief, and Economic Security (CARES) Act, accounting for $480 billion of the difference. In addition, unemployment compensation spending fell by $76 billion year over year, owing to two factors: 1) weekly unemployment insurance benefits included a $600 federal supplement in June 2020, but only a $300 federal supplement in June 2021; and 2) fewer people are collecting benefits due to lower unemployment and stricter eligibility rules in some states.
Year-to-date spending is up 6% ($289 billion) compared to the first nine months of FY2020, and is up 58 percent ($1.9 trillion) compared to the same period last year. These changes reflect sustained spending on COVID-19 relief programs, particularly refundable tax credits and supplemental unemployment compensation, as every month so far in the current fiscal year has included pandemic-related expenditures, whereas only March-June last year did.
Tracking the Federal Deficit: May 2021
According to the Congressional Budget Office, the federal government ran a $132 billion deficit in May, the eighth month of fiscal year 2021. The difference between $463 billion in revenue and $596 billion in spending was $463 billion in May’s deficit. It’s worth noting that May expenditure was impacted by the fact that May 1 was on a Sunday, pushing certain payments into April that would normally be paid in May. The May deficit would have been $192 billion if not for these scheduling shifts.
The federal government has a $2.1 trillion cumulative deficit this fiscal year, which is the difference between $2.6 trillion in revenue and $4.7 trillion in spending. This deficit is 10% ($184 billion) higher than it was in FY2020, when just three months of pandemic-related spending had occurred, and 179 percent ($1.3 trillion) higher than it was in FY2019.
Trends to look out for: Normal spending and revenue patterns have been disrupted by the epidemic response. Individual income taxes are typically paid in April; however, due to COVID-19, the federal government has pushed back Tax Day in both 2020 and 2021. Individual income taxes were due on May 17 this year, as opposed to July 15 in 2020. Furthermore, predicted quarterly tax payments were due in April this year, when they will be due in July 2020. When comparing year-over-year deficits, these shifting dates must be taken into consideration.
Year-to-date revenues are up dramatically, thanks in part to the early deadline for individual tax payments: they’re up 29% ($587 billion) over the same period previous fiscal year. Furthermore, year-to-date revenues in FY2021 are 15% higher than comparable FY2019 collections. The moved 2021 deadline cannot account for this rise because the individual tax deadline for 2019 was in April, as is customary. Rather, the increase is due to rising wages and salaries, especially among high-income workers, who account for the majority of income tax collection. Unemployment insurance receipts are increasing as states replenish their trust funds, and corporate income tax collections are also up from FY2019.
Federal spending is still at an all-time high, owing mostly to COVID-19 relief measures. Outlays are 20 percent ($771 billion) higher than this time previous fiscal year and 55 percent ($1.7 trillion) higher than this time last fiscal year. Pandemic-related expenses have been reported in every month of the current fiscal year so far, whereas only March, April, and May did so for the same period last year. The cumulative year-over-year increase in spending will likely appear less apparent as FY2021 progresses and more of the comparable period of FY2020 incorporates pandemic relief. In FY2021, the major sources of additional spending were recovery rebates, Small Business Administration assistance programs (most notably the Paycheck Protection Program), and improved unemployment insurance payouts.
Tracking the Federal Deficit: April 2021
According to the Congressional Budget Office (CBO), the federal government had a $225 billion deficit in April, the seventh month of fiscal year 2021. The difference between $439 billion in revenue and $663 billion in spending was $439 billion in April’s deficit. April’s deficit would have been $165 billion if not for a change in the scheduling of some payments because May 1 came on a weekend. (All figures have been changed to reflect this temporal adjustment for the rest of this entry.)
The federal government has a $1.9 trillion cumulative deficit so far this fiscal year, the difference between $2.1 trillion in revenue and $4.0 trillion in spending. This year’s deficit is 26 percent ($389 billion) more than last year’s at this point, and 252 percent ($1.3 trillion) higher than this year’s at this point.
In normal years, spending and revenues follow similar monthly patternsindividual income taxes arrive in April, corporate income taxes are paid quarterly, and refundable tax credits are mostly paid in February and March. By comparing each month’s spending and receipts to the same month the previous year, researchers can measure changes in federal finances.
However, 2020 was not a typical year (and neither is 2021). COVID-19 prompted enormous, and frequently temporary, shifts in federal spending and revenue. As a result, year-over-year comparisons now mostly capture differences in COVID-19 emergency responses rather than underlying trends in the government’s fiscal health. For example, the April deficit was largebut it was 78 percent smaller than the April deficit last year, when provisions in the Coronavirus Aid, Relief, and Economic Security (CARES) Act resulted in the highest monthly deficit on record. Individual income tax payments due on April 15 often cause the federal government to run a surplus in April, making comparisons to previous Aprils difficult. This year, however, the deadline for completing final tax payments has been extended out to May 17, making April 2021 a fiscally unique month. Year-over-year comparisons of monthly spending, which was 61% higher in April 2019 (though 38% lower than the unusual amount in April 2020), are more insightful, but still primarily mirror the direction of COVID-19 expenses.
Year-to-date revenues are up significantly: 16 percent higher than at the same point last fiscal year (although later filing deadlines in fiscal year 2020 inflate this difference) and 5% higher than in fiscal year 2019despite the fact that the deadline for filing individual income taxes fell in April 2019 but has not yet arrived in fiscal year 2021. This fiscal year’s increasing revenues are partially due to rising wages and salariesespecially for higher-income workers who pay the majority of income taxesand, to a lesser extent, higher unemployment insurance payroll taxes as states replenish their trust funds.
Much though revenues have increased, spending has increased even more: Total spending is up 21% ($687 billion) from the same time last fiscal year and up 56% ($1.4 trillion) from the same point this fiscal year. The federal government’s response to the COVID-19 outbreak and the recession is driving the increase in spending from the previous fiscal year. Pandemic-related expenditures have been included in every month of the current fiscal year so far, whereas only March and April did so for the same period last year.
Tracking the Federal Deficit: March 2021
According to the Congressional Budget Office (CBO), the federal government had a $658 billion deficit in March 2021, the sixth month of fiscal year 2021. This month’s deficit was $487 billion higher than previous March’s, which was the difference between $267 billion in revenue and $925 billion in spending (adjusted for shifts in the timing of certain payments). The government deficit has risen to $1.7 trillion in fiscal year 2021, up 129 percent from the same time last year. While revenues have increased by 6% year over year, total spending has increased by 45 percent, owing mostly to the COVID-19 pandemic, its economic consequences, and the federal government’s fiscal reaction.
Analysis of Notable Trends: When time variations were taken into account, outlays in March 2021 were $517 billion higher than in March 2018, a 127 percent rise. Unemployment insurance, refundable tax credits, and the Paycheck Protection Program of the Small Business Administration accounted for the majority of the increaseboth from March to March and from the previous fiscal year to this one. The payment of pandemic recovery rebates permitted by the Consolidated Appropriations Act and the American Rescue Plan Act increased refundable tax credit spending by $346 billion in March 2021 compared to March 2020.
In the first six months of fiscal year 2021, revenues totaled $1.7 trillion. Despite the ongoing recessionwhich had only recently begun to show up in budget figures at this point last yeartotal revenues have increased by $100 billion, or 6%, over the same period the previous year. Individual income and payroll taxes climbed by $78 billion, while corporate income taxes rose by $20 billion on net. COVID-19 had its initial effects on economic activity in March 2020, however they were minor. In March 2021, receipts were $30 billion higher than in that month, an increase of 13%. Increased withheld (up 12%) and non-withheld individual income and payroll taxes provided the biggest revenue boosts (up 35 percent ).
Tracking the Federal Deficit: February 2021
According to the Congressional Budget Office, the federal government had a $312 billion deficit in February 2021, the fifth month of fiscal year 2021. The February deficit was $77 billion higher than the previous month’s, which represented the difference between $246 billion in revenue and $558 billion in spending. So far in fiscal year 2021, the deficit has risen to little over $1 trillion, an increase of 83 percent year over year (adjusted for shifts in the timing of certain payments). Total spending has climbed by 25% year over year, while revenue has increased by 5%.
Notable Trends Analysis: Pandemic relief legislation accounted for the majority of the increase in spending in February and for the entire fiscal year 2021. The Small Business Administration’s (SBA) Paycheck Protection Program, for example, accounted for the majority of the $133 billion increase in spending from last February to this month. SBA spending in February increased to $91 billion, up from $100 million in the same month previous year. Due to a delayed start to the tax filing season this year, higher outlays on unemployment compensation ($44 billion, up from $3 billion in February 2020) and $17 billion less in refundable tax credit payments were the other two major spending changes.
Despite a record recession, revenues in the first five months of fiscal year 2021 were 5% higher than in the same period the previous year (before the onset of COVID-19). This solid rise is remarkable, especially when contrasted to the start of the last big recession, when revenues fell 11% year over year in the first five months of fiscal year 2009.
Because the pandemic recession has been so unequal, this fiscal year’s revenues have held up. Because the majority of lost jobs pay low wages, overall incomeand thus the federal government’s revenue basehas declined far less than total employment. Other revenue-stretching forces are more transient. The tax filing season has been pushed back, and COVID-19 has hindered the IRS’s refund processing, thus many refunds comparable to those issued in February are yet to be issued in 2021, temporarily inflating net revenues. Meanwhile, the American Rescue Plan exempts some unemployment benefits from taxation, reimbursing a large portion of the taxes already paid on these benefits. Despite these temporary increases in net revenue, the federal government’s revenue rise in the midst of such a significant contraction is remarkable.
Tracking the Federal Deficit: January 2021
According to the Congressional Budget Office, the federal government had a $165 billion deficit in January, the fourth month of fiscal year 2021. This month’s deficit was $132 billion higher than last January’s, which represented the difference between $552 billion in spending and $387 billion in receipts. However, the federal government’s finances have deteriorated more than the bare data show. After accounting for changes in the timing of some payments, the January deficit would have been $211 billion higher than the previous month’s. So far this fiscal year, the government deficit has reached $738 billion, up 120 percent from the same point last year (adjusted for timing shifts). Cumulative revenues have increased by 1% compared to the same time previous fiscal year, but cumulative spending has increased by 27%, owing primarily to the COVID-19 pandemic and the federal reaction to it.
Analysis of Notable Trends: After months of COVID relief running out, Congress passed the Consolidated Appropriations Act, 2021, just before the new year to provide another wave of funding (CAA). The bill’s first month of implementation resulted in significant new spending, primarily in areas that have become familiar drivers of spending during the epidemic and recession. Refundable tax credits, which include recovery rebates, have increased by $142 billion since January. Unemployment compensation spending increased from $3 billion to $34 billion from January 2020 to 2021, continuing a pattern that began in April 2020. Increased Medicare spending (up $7 billion, or 19 percent, from last January), as well as emergency rental housing aid ($25 billion) and outlays for the Public Health and Social Services Emergency Fund (up $9 billion) also contributed to the monthly deficit.
Pandemic assistance has also accounted for the majority of the increase in spending so far this fiscal year. Refundable tax credits (up $126 billion from this time last year) and unemployment insurance payouts (up $140 billion) account for over 60% of total year-to-date spending growth. The Public Health and Social Services Emergency Fund has also increased by $26 billion in the first four months of fiscal year 2020, while Medicaid spending has increased by $29 billion.
Individual income, payroll, and corporate income tax receipts all increased by 4% in January compared to the previous year.
Revenues have increased by 1% thus far this fiscal year. Increased revenues from non-withheld individual taxes (up 21 percent), corporate income taxes (up 12 percent), and unemployment insurance revenue (up 12 percent) account for the slight net rise (up 34 percent ). These increases more than compensated for income losses caused by the pandemic. Lower wages resulted in a 3% decline in the amount withheld from workers’ paychecks; lower consumer expenditure and the suspension of some aviation taxes until the end of calendar year 2020 resulted in a 25% loss in excise tax revenue; and a drop in imports resulted in a 13% drop in customs duties.
Tracking the Federal Deficit: December 2020
According to the Congressional Budget Office, the federal government had a $143 billion deficit in December, the third month of fiscal year 2021. This deficitthe difference between $346 billion in revenue and $489 billion in spendingwas exacerbated by the fact that January 3 fell on a Sunday, causing some payments to be made in December instead of January. December’s deficit would have been $96 billion if not for the scheduling shift, still $55 billion higher than December 2019. So far in fiscal year 2021, the deficit has risen to $572 billion, up $215 billion from the same point last year. While revenues were essentially unchanged from previous year during these months, outlays increased by 16%. (accounting for timing shifts in payments).
Trends to look out for: December continued the pattern set in fiscal year 2021, with little change in revenue year over year but a 17 percent increase in spending. Unemployment benefits, which were $3 billion last December but $28 billion this December, contributed the most to the surge in spending. (All spending comparison figures for specific projects have been updated to account for timing shifts.) There has been a pattern: Unemployment insurance payouts have resulted in over a 40% increase in total spending compared to the same period last year, rising from $7 billion in the first three months of fiscal year 2020 to $80 billion so far this fiscal year. The deficit was widened further by December’s spending on Medicaid (up $12 billion, or 36%, from the previous month) and Social Security payouts (up $5 billion, or 6%, from the previous month).
Individual income and payroll tax receipts increased by 3% in December compared to the previous year.
Tracking the Federal Deficit: November 2020
According to the Congressional Budget Office, the federal government had a $146 billion deficit in November, the second month of fiscal year 2021. The discrepancy between $365 billion in spending and $219 billion in receipts created this imbalance. The fact that November 1 fell on a weekend, however, artificially depressed spending in November, leading $63 billion in payments that would have been made in November to be made in October instead. If the payments had been made in November, the spending and deficit for this month would have been $63 billion higher, totaling $428 billion (spending) and $209 billion (deficit) (deficit). The federal government has run a $430 billion deficit in the first two months of this fiscal year, up $87 billion from the same period last year. Spending has increased by 9% this fiscal year compared to the same period last year, while revenues have decreased by 3%.
Trends to look out for: The government deficit in calendar year 2020 is still higher than comparable months in 2019, though by far lesser amounts than during the peak of the federal reaction to the COVID-19 outbreak and recession a few months ago. After accounting for the effects of scheduling shifts, November’s deficit was $50 billion higher than November’s of the previous year. This June’s deficit, on the other hand, was $805 billion higher than previous June’s (also adjusted for timing shifts). Unemployment insurance (spending up $23 billion year over year), entitlements ($6 billion more on Medicare, $4 billion more on Social Security, and $4 billion more on Medicaid), and interest on the debt ($3 billion more than last November) were the three areas most responsible for the month-over-month increase in the monthly deficit.
Revenues were also down 3% from November, owing to decreased employment levels, which resulted in a drop in withheld individual income and payroll taxes.
Tracking the Federal Deficit: October 2020
According to the Congressional Budget Office, the federal government had a $284 billion deficit in October, the first month of fiscal year 2021. The gap between $238 billion in revenue and $522 billion in outlays accounts for the deficit. However, because November 1 fell on a Sunday this year, certain payments that would typically be made in November were transferred to October, causing the shortfall to grow this month. October’s deficit would have been $230 billion if the payments had not been made.
In any case, the October deficit is a significant increase above the $134 billion deficit recorded in October. The year-over-year increase in the deficit is due to a combination of lower revenues3% lower than last October, mostly due to lower individual income tax receiptsand much higher outlays37% higher than last October (23 percent higher when accounting for the timing shift of some payments), primarily due to the ongoing response to the COVID-19 pandemic and its economic consequences.
Is the US economy growing in 2021?
Despite two new viral varieties that rocked the country, the US economy increased by 5.7 percent in 2021, the best full-year rate since 1984, roaring back in the pandemic’s second year.