Annual deficit hits $1.9 trillion in just eight months

Annual deficit hits $1.9 trillion in just eight months
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The deficit in the first eight months of the 2020 fiscal year hit a record $1.9 trillion, surpassing the largest annual deficit on record, $1.4 trillion in 2009.

Treasury Department data released Wednesday found that the deficit for May hit $399 billion, the second highest monthly level after April's record-shattering $738 billion figure.

The huge rise in borrowing in recent months has come in response to the coronavirus pandemic, which prompted Congress to approve some $3.6 trillion in emergency aid, relief, stimulus and public health funding. The House has passed another $3 trillion bill, but the Senate is likely to settle on a significantly smaller version, closer to $1 trillion, in July.

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Economists say that borrowing money to prevent economic collapse is a good investment, and if done right can lead to both better economic outcomes and lower debt levels than austerity measures in a crisis. For example, nearly a fifth of the spending in the 2020 fiscal year, which began in October, went toward income security.

But budget hawks have also been quick to note that aid should be targeted and that once that crisis is over, the government will face serious challenges in managing its debt burden.

The Congressional Budget Office has estimated that based on bills currently signed into law, the deficit for the year is likely to approach $4 trillion, several times the previous record.

The overall level of debt the government owes is set to surpass annual economic output this year for the first time since World War II, and is likely to break records in the coming years.