April deficit sets record at $738 billion

April deficit sets record at $738 billion
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The federal deficit for the month of April broke all records, hitting $738 billion, a number larger than many previous annual deficits, according to Treasury data released Tuesday.

All in all, the deficit for just the first 7 months of the fiscal year came to $1.48 trillion, eclipsing the largest annual deficit on record, which was $1.4 trillion in 2009.

The enormous spike in borrowing follows the passage of roughly $3.6 trillion worth of emergency measures to combat the coronavirus pandemic and help stabilize the economy.

The Treasury statement noted that it had paid out $217 billion in Economic Impact Payments, the stimulus checks people received in their bank accounts, $142 billion in payments to state and local government, $146 billion in increased health and Medicare program costs and $46 billion in increased unemployment benefits and Labor Department programs.

With tax payments delayed from April until July, receipts dropped $294 billion in comparison to last April.

On Tuesday, Democrats released a bill for another round of emergency relief that clocked in at $3 trillion, though the Senate is expected to negotiate its own version.

Economists say that increased deficit spending in a time of economic turmoil can help the economy recover but also warn that plans to bring the debt burden down after the crisis will be necessary.

Budget watchers were critical of Congress and the Trump administration in recent years as the deficit continued to climb even while the economy grew robustly and unemployment dropped to 50-year lows.

Even before the pandemic, the Congressional Budget Office had repeatedly warned that the growing debt level was unsustainable and would eventually start to eat into economic growth. Net interest payments, which were the fastest growing budgetary category, would increasingly crowd out other budgetary priorities, such as defense and health care.

This year, the debt is expected to surpass 100 percent of gross domestic product for the first time since World War II and is on track to break its historical record in the coming years.