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The US Deficit Surpassed $3.1T For 2020, Is There A Limit?

The US deficit topped $3.1 Trillion for the fiscal year 2020 that ended in September. By comparison, the deficit in 2019 totalled $984 Billion. The vast discrepancy is a result of the four stimulus packages passed by Congress to fight the economic consequences of the pandemic.

Taking things into perspective, this is far the largest fiscal stimulus-response since the Great Depression. The last time the government ran similar deficits as a proportion of the economy was in World War II. Moreover, the debt hasn’t been that high since 1946 when the federal debt was 106.1% of GDP.

Moving forward, both presidential candidates are proposing aggressive spending programs that, even when taking their tax plans into account, are unlikely to reduce the deficit below pre-COVID levels. While cheap money has allowed this dynamic to persist for some time now, the question still persists: When will the bill come due?

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