US federal budget deficit hits $2.8T, second-largest figure ever

The U.S. federal budget deficit totaled $2.8 trillion during the 2021 fiscal year, marking the second-highest budgetary shortfall on record, but a slight improvement from the previous year as the economy recovers from the COVID-19 pandemic, the Treasury Department said.

The annual deficit was $360 billion lower than last year, in what the Biden administration said reflected an “improved economy due in part to the American Rescue Plan Act of 2021 (ARP) and COVID-19 vaccination rollout.” The budget year ended on Sept. 30.

“Today’s joint budget statement is further evidence that America’s economy is in the midst of a recovery,” Treasury Secretary Janet Yellen said in a statement.

Year-end data from the September 2021 Monthly Treasury Statement of Receipts and Outlays of the United States Government show that the deficit for FY 2021 was $2.8 trillion, $360 billion less than the prior year’s deficit. As a percentage of GDP, the deficit was 12.4 percent, a decrease from 15.0 percent in FY 2020.

The FY 2021 deficit was $897 billion less than the estimate of $3.7 trillion in the 2022 Budget published in May and $342 billion less than the estimate of $3.1 trillion in the Mid-Session Review (MSR), a supplemental update to the Budget published in August. Updates included in this year’s MSR were limited to tax receipts, outlay for tax credits, and programs where economic changes were expected to have the most significant effects across the budget window: Social Security, Medicare, Medicaid, Supplemental Nutrition Assistance Program, and unemployment compensation.