US budget deficit for the month rose to a record $ 864 billion: what's next

Washington increases pandemic spending and tax revenues fall, reports MarketWatch.

The numbers: The federal government’s budget deficit rose to $ 864 billion in June, breaking a monthly record. This happened after US authorities gave out huge amounts of money to try to help small businesses and unemployed Americans in the context of the coronavirus pandemic.

Last month’s increase raised the budget deficit this fiscal year to a total of $ 2,7 trillion, compared with $ 747 billion for the same nine-month period last year, the US Treasury Department said on Monday, July 13. The government works with an annual budget that runs from October 1 to September 30, instead of using the concept of a calendar year, more common in the business world.

The US intends to register a record deficit of $ 3,7 trillion in fiscal 2020 due to unprecedented efforts to support the economy. Over the past year, the budget deficit amounted to almost $ 1 trillion.

The last time the United States experienced such a huge deficit, measured as a percentage, during World War II.

What happened: Washington spent $ 1,11 trillion in June against $ 572 billion in May. In the same month a year ago, costs were much less, $ 342 billion.

Most of the increase in spending last month was due to the Paycheck Protection Plan, a small business assistance package designed to provide non-repayable loans to companies with salary workers.

Unemployment benefits totaled a whopping $ 116 billion, including $ 80,4 billion paid by the federal government.

Millions of self-employed people who were never eligible to claim unemployment benefits became eligible, and the federal government also provided an extra $600 weekly coronavirus benefit. This bonus will stop being paid at the end of July and is unlikely to be extended, at least by the same amount.

On the subject: Tens of thousands of Americans received financial assistance twice in connection with coronavirus

A year earlier, the states and the federal government spent only $ 2 billion in unemployment benefits in June, as unemployment reached a 50-year low of 3,5%. Now the unemployment rate is officially 11,1%, although most economists believe that in reality it is several points higher.

At the same time, tax and other revenues in June amounted to only $ 241 billion. A year earlier, the government received $ 333 billion.

Tax revenues declined due to the extended tax payment period from April to July along with a depressed economy.

The big picture: Washington has already sent huge sums of money to direct payments to households, extended unemployment benefits, loans for small businesses, and assistance to industries that are considered critical, such as airlines. Congress may also add more than $ 1 trillion in additional emergency measures by the end of summer.

On the subject: An additional $ 600 to unemployment benefits can be obtained retroactively: procedure

Most likely, the economy will need a lot of help, at least until the end of the year, when tax revenues fall, and many people and companies will still need support.

Market reaction: the yield on 10-year Treasury bonds TMUBMUSD10Y was 0,609%. The Dow Jones Industrial Average is up 1,08% and the S&P 500 is down 0,41% (as of 12:30 ET on July 14).

Read also on ForumDaily:

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4,8 million new jobs: June US unemployment decline surpasses all expectations

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