By MARTIN CRUTSINGER AP Economics Writer
WASHINGTON (AP) – The US budget deficit totaled $ 2.77 trillion for 2021, the second highest on record, but an improvement from the all-time high of $ 3.13 trillion reached in 2020. Two-year deficits reflect trillions of dollars in government spending to counter the devastating effects of a global pandemic.
The Biden administration said on Friday that the deficit for the fiscal year that ended September 30 was $ 360 billion lower than in 2020, as a recovering economy boosted income, helping to offset government spending related to pandemic relief efforts.
Before the deficit swelled during two years of the global pandemic, the biggest deficit had been a $ 1.4 trillion shortfall in 2009. At that time, the United States was spending heavily to get the country out of a dire recession after the 2008 financial crisis.
As a percentage of the overall economy, as measured by gross domestic product, the 2021 deficit is 12.4% of GDP, down from the 2020 deficit, which was 15% of GDP.
The 2020 deficit was the highest relative to the overall economy since World War II, when it reached 29.6% of GDP in 1943 as the United States borrowed heavily to finance the war effort. These figures remained high at 22.2% of GDP in 1944 and 21% of GDP in 1945 before starting to decline once the war was won.
For 2021, the joint Treasury and Bureau of Management and Budget report says government spending rose 4.1 percent to $ 6.82 trillion. This was offset by an 18.3% increase in government revenue to $ 4 trillion. The income gain reflects an improving economy as millions of people who lost their jobs at the start of the pandemic returned to work and corporate profits rebounded after a dreadful 2020.