US Fiscal Year 2021 Budget Deficit Hits 3,257 Trillion Won, Second Largest Ever

U.S. Department of the Treasury Headquarters
Photo by AFP Yonhap News

[Asia Economy Reporter Park Byung-hee] The United States recorded a fiscal deficit of $2.77 trillion (approximately 3,257 trillion KRW) for the last fiscal year (October 2020 to September 2021), marking the second highest deficit in history.

According to the U.S. Treasury Department on the 23rd (local time), the fiscal deficit for the 2021 fiscal year, which ended last month, decreased by $360 billion from the record high of $3.13 trillion in 2020. The fiscal deficit ratio to Gross Domestic Product (GDP) for the 2021 fiscal year was 12.4%, down 2.6 percentage points from 15% in 2020.

The Treasury explained that as the economy recovered from the COVID-19 crisis, tax revenues increased somewhat, offsetting the increased government spending.

Before the COVID-19 pandemic, the largest U.S. fiscal deficit was recorded in 2009, right after the financial crisis, at $1.4 trillion. During the COVID-19 pandemic, fiscal spending surged, causing the fiscal deficit for the fiscal year to more than double that of 2009, recording around $3 trillion for two consecutive years.

Last year, fiscal spending rose 4.1% from the previous year to $6.82 trillion, while tax revenues increased by 18.3% to $4 trillion.

U.S. Treasury Secretary Janet Yellen stated in a press release, "The U.S. economy has returned to normal and started functioning." However, Secretary Yellen urged Congress to promptly pass infrastructure budgets, saying, "Although the U.S. economic recovery is stronger than other advanced countries, it remains vulnerable."

The Congressional Budget Office projected that the deficit for the 2022 fiscal year, which began on the 1st, will shrink to $1.15 trillion and fall below $1 trillion within the next three years.