U.S. budget deficit in 2021 could be greater than the 2020 record numbers

Today Reuters reported that the coronavirus spending has pushed the U.S. 2020 fiscal year deficit to record levels. The news outlet wrote, “The U.S. budget deficit hit a record $3.132 trillion during fiscal 2020, more than triple the 2019 shortfall due to massive coronavirus rescue spending, the U.S. Treasury said on Friday. The deficit more than doubled the previous record of $1.416 trillion in fiscal 2009, when the United States was battling a financial crisis.”

According to Reuters this increase is “made up almost entirely from coronavirus aid programs: increased healthcare costs, stimulus checks and unemployment compensation, along with the cost of small business and corporate rescue programs approved by Congress.”

This makes it highly likely that this year’s fiscal deficit (which is at a record $3.132 trillion) could be dwarfed by a larger budget deficit in 2021. Now after approximately eight months in which the pandemic has greatly affected economies worldwide the costs, as well as the length of time before we returned to a “new normal”. Any sort of “normal” will require the investment of huge amounts of money to reignite the economy and give aid to the millions of Americans that are currently unemployed. Add to that the fallout as companies begin to fail and file for bankruptcy leaving those furloughed workers in need of a new job.

On that note any investments in the U.S. economy our has come to a halt. A current stalemate between the House and Senate in regards to allocating more fiscal stimulus to aid the massive number of unemployed Americans, and give relief to industries that have been hardest hit by the global pandemic.

Although both Democrats and Republicans recognize the real need for more stimulus it now seems unlikely to be forthcoming prior to the election. Currently the former Vice President Joe Biden is in the lead according to most polls. It is also widely believed that if Biden becomes our next president that stimulus expenditures will be much greater than what was allocated this year. If Biden wins the presidential election, we could see the largest budget deficit emerge in 2021.

Wishing you as always, good trading and good health,