The federal budget gap will widen to $3 trillion this year, nearly triple the shortfall recorded just two years ago as the pandemic continues to grow the deficit, the Congressional Budget Office said in its latest 10-year projections released Thursday.
The shortfall is significantly wider compared with earlier projections, due to enactment of President Joe Biden’s $1.9 trillion pandemic relief package which Democrats approved in March without Republican support.
The gap totals about 13.4 percent of GDP, making it the second-largest discrepancy relative to the size of the economy since World War II and exceeded only by the 14.9 percent shortfall logged last year. After this year, the deficit is expected to average about $1.2 trillion through 2031.
Federal debt held by the public will rise to $23 trillion by the end of this year, totaling 103 percent of GDP. CBO’s projections only account for legislation passed through May 18, excluding the president’s current infrastructure ambitions.
The independent budget agency expects inflation to rise “sharply” before subsiding in the second half of this year.
CBO also projects “stronger economic growth” than it did in February, thanks to legislation Congress has since enacted and “a more rapid routine to normalcy” as social distancing practices decline while the pandemic wanes in the United States.
The unemployment rate will continue to decline, dropping to 3.8 percent next year and then hovering around 4 percent for several years, the agency said.