Uncle Sam ended fiscal 2021 deep in the red, the Congressional Budget Office said Friday, calculating the government ran a $2.8 trillion deficit, the second-worst on record.
The COVID-19 pandemic has pried open the government’s wallet unlike anything since World War II, pushing spending even higher in 2021 than it was in 2020. But the economy recovered enough to lift revenue, so the overall deficit was better this year, according to CBO’s estimate.
Final figures will come from the Treasury Department, likely later this month.
CBO’s estimate comes as Congress is debating a new round of spending in Democrats’ $3.5 trillion makeover of the nation’s social welfare policies. That would come on top of a historic spike in spending over the past 18 months.
Spending in 2021 was $2.4 trillion more than it was in 2019, the last full year before COVID-19, the analysts said. That covers a variety of things including new tax credits, assistance for public schools, $50 billion in additional food stamps and farm payments.
Higher inflation also increased the cost of paying interest on the national debt, CBO said.
The revenue side of the ledger, however, was brighter from the fiscal standpoint, with receipts soaring 18% in 2021 compared to 2020. CBO says the government collected more than $4 trillion over the past year.
“In large part, that change reflects the general strength of the economy over the past year,” CBO said.
Withholding from paychecks was up $244 billion, suggesting higher wages and salaries in the workforce.
Corporate income taxes rose 75% over the past year because profits were higher, CBO said.