The federal budget is going up with no plans to go down; on the contrary, it is set to reach for the sky. “Acting big” is what Treasury Secretary Janet Yellen suggested doing regarding direct payments to Americans to alleviate the effects of the pandemic.
By “acting big,” the federal government raised its deficit figure to $165 billion, $132 billion more than the 2020 deficit, severely increasing the federal budget and there are no intentions in the White House or Congress to change this path.
Figures issued in a document by the Congressional Budget Office reveal that the federal budget in the first four months of fiscal year 2021, which began in October, was $738 billion, an 89% increase over the same period last year.
That substantial difference in the federal budget is, according to the Office, largely the result of the economic disruption caused by the 2020-2021 coronavirus pandemic and the federal government’s response to it.
In March 2020, as the coronavirus pandemic was consolidating around the country, the federal government passed the $2 trillion Coronavirus Assistance, Relief and Economic Security Act. Then, former President Donald Trump signed an additional $900 billion coronavirus stimulus bill in December.
And Joe Biden’s administration shows no intention of stopping either. The president has promised to pass a titanic $1.9 trillion stimulus package, including direct payments of $2,000 to Americans and an additional $400 in unemployment pay per week.
The pandemic has been anything but gentle on American citizens; neither in terms of healthcare, nor economically. The Bureau of Economic Analysis showed in its most recent January report that the U.S. economy contracted 3.5% in 2020, cementing the worst performance since the 1940s. The U.S. also recorded its largest increase in poverty since the 1960s, when the poverty rate soared to 11.8% in December.
Federal budget under Biden
The Biden administration has shown clear results: total spending in January 2021 was $552 billion, CBO estimates, thus adding more and more figures to the federal budget.
The Manhattan Institute conducted a report revealing that President Biden’s plans would increase the federal budget by $11 trillion over the next 10 years, increasing the deficit and potentially leading the U.S. into a debt crisis, experts said.
Joe Biden set the budget tone with huge spending in areas such as infrastructure, the green agenda, healthcare and Social Security. To raise sufficient resources, Biden has proposed raising taxes, yet, according to the Manhattan Institute report, these expenditures would easily exceed the taxes to be raised.
“The policies he is proposing will jeopardize the economy in the long run,” Brian Riedl, senior fellow at the Manhattan Institute and author of the report, told the Daily Caller.
“$4 trillion in new taxes,” the researcher reveals, “is the largest tax increase since the end of World War II.” To the troubling figure of $11 trillion in new spending will certainly be added more regulation, a higher minimum wage. “All of that is going to weaken the economy,” he stated.
However, according to the Congressional Budget Office, the U.S. economy will rebound. According to Bureau estimates, U.S. Gross Domestic Product will return to its previous peak by mid-2021 and the unemployment rate will return to normal by 2022.
“GDP is projected to return to its pre-pandemic level by mid-2021 and exceed its potential level (i.e., its maximum sustainable level) by early 2025,” the report notes.