The first federal budget incorporating the impact of the COVID-19 crisis is predicting a record $3.3 trillion deficit, set to eclipse the size of the U.S. economy by next year.
The updated budget outlook released Thursday by the Congressional Budget Office and based on a July economic forecast projects that the federal budget deficit will reach $3.3 trillion, or 16% of GDP in fiscal year 2020, which ends Sept. 30.
That would grow the amount of federal debt to 104% of GDP in 2021, up from 79% in 2019, and surpass a previous record by reaching 107% of GDP by 2023. In nominal dollars, debt will double from $16.8 trillion in 2019 to $33.5 trillion in 2030, CBO said.
CBO is also predicting that all major trust funds, including Social Security and Medicare, will exhaust their reserves in the next 11 years, with the Social Security retirement program running out of reserves by 2031.
The pandemic added $2.1 trillion to deficits as of July, due to COVID-19 relief legislation passed so far.
Depressed revenue and increased spending are expected to continue. In 2020, spending is expected to total 32% of GDP, compared to a historic average of 20.3%.
"Today's borrowing is largely appropriate and necessary in order to reduce and distribute over time the economic pain caused by the COVID-19 pandemic. But CBO's newest figures show that our long-term course is unsustainable, and much worse than before," the nonpartisan Committee for a Responsible Federal Budget said in its analysis of the CBO budget outlook. "Once the current crisis ends, policymakers must turn their attention to long-term deficit reduction to put the country on solid fiscal ground."