CBO Projects US Budget Deficit of $3.7 Trillion in 2020

The Congressional Budget Office (CBO) on Wednesday released its latest projections for the U.S. economy in 2020 and preliminary total for both this year and next. The picture is not a pretty one.

The CBO now projects real (inflation-adjusted) GDP to decline by 12% in the second quarter, an amount equal to an annual decline of 40%. Along with the second quarter decline comes an unemployment rate of 14%.

The federal budget deficit in 2020 is forecast to total $3.7 trillion and the federal debt held by the public is expected to reach 101% of GDP by the end of this year and 108% of GDP by the end of 2021. Federal debt held by the public at the end of the fourth quarter of 2019 totaled $17.2 trillion

As the following chart indicates, estimated 2020 GDP is $20.4 trillion. GDP in 2019 totaled $19.2 trillion, indicating that federal debt held by the public ran to just over 90% of last year’s GDP.

CBO’s Economic Projections for 2020 and 2021
2020 Annual
Q1 Q2 Q3 Q4 2020 2021
Real GDP (Percentage change from preceding quarter) -0.9 -11.8 5.4 2.5 n.a. n.a.
Real GDP  (Percentage change, annual rate)a -3.5 -39.6 23.5 10.5 -5.6 2.8
GDP (Trillions of dollars) 21.6 19.1 20.1 20.7 20.4 21.3
Unemployment Rate (Percent) 3.8 14 16 11.7 11.4 10.1
Interest Rate on Three-Month Treasury Bills (Percent) 1.1 0.1 0.1 0.1 0.4 0.1
Interest Rate on Ten-Year Treasury Notes (Percent) 1.4 0.6 0.7 0.7 0.8 0.7

From the CBO’s projection:

The economy will experience a sharp contraction in the second quarter of 2020 stemming from factors related to the pandemic, including the social distancing measures put in place to contain it. In the third quarter, economic activity is expected to increase, as concerns about the pandemic diminish and state and local governments ease stay-at-home orders, bans on public gatherings, and other measures restraining economic activity. However, challenges in the economy and the labor market are expected to persist for some time. Interest rates on federal borrowing are expected to remain quite low in relation to rates in recent decades.


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