The United States (US) reported on Tuesday, May 12, 2020, that it has witnessed a record $738 billion budget deficit in April as there was a sharp rise in government expenditure while revenues had been shrunken due to the coronavirus pandemic.
Normally, April is a month in which Treasury posts a surplus since tax payments in the US are due on April 15, but it has been delayed this year until July 15 due to the pandemic. On record, the US government has only reported an April deficit 15 times over the past 66 years.
Record Budget Deficit for the US
The US Treasury Department explained that the record budget deficit in April was the reflection of the surge of government spending to fight the economic and health crises caused by the widespread virus impact. Before April, the US had its last record budget deficit for a month was $235 billion in February 2020 when the virus outbreak had forced to shut entire business operations.
Over nearly two months, the Trump administration has been facing strict lockdown and many businesses were shuttered to help contain the spread of the virus, which has killed more than 80,000 people in the US, and as a result, the federal budget had fallen sharply. In a response about the unprecedented low of a budget figure, a senior U.S. Treasury official told reporters, “They really are striking numbers that I didn’t think I would ever see.”
Sources reported that the US fiscal year-to-date deficit surged to $1.48 trillion compared to a $531 billion deficit in 2019, which showed an easy surpass of the previous monthly deficit record of $870 billion in April 2011.
Reduced Receipts but Surge Expenses
As estimated by the senior Treasury official, roughly $600 billion in outlays for April were attributable to government spending on coronavirus relief measures, while receipts were reduced by about $300 billion by the crisis. The primary reason for a reduction in receipts was the deferral of certain individual and business taxes from April, as well as changes to tax laws passed in recent legislation, Treasury said.
A source reported that the total receipts in April were $242 billion, which was a surge of 55% from a year earlier, while outlays (expenses) for the month jumped up 161% to $980 billion. According to Treasury data, about $283 billion in non-withheld individual income taxes were paid while receipts for taxes withheld from worker paychecks was totaled $114 billion in April 2019.
With this sharp contraction of the fiscal budget caused by the virus pandemic, the US has witnessed an explosion of a sharp increase in the unemployment rate in the country. More than 33 million Americans have filed for unemployment benefits since March 21, which equates to roughly one in five jobs, which has also provided the US government’s revenue base.
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