CBO projects US deficit will soar to $3 trillion this year

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The Congressional Budget Office is projecting that the United States's deficit will balloon to $3 trillion in 2021.

The CBO announced the projections on Thursday afternoon, with the high figure coming close to last year’s record of $3.13 trillion, which was the highest relative to the size of the economy since the 1940s. The deficit is expected to decrease to $1.15 trillion in 2022.

In its updated 10-year budget projection, the nonpartisan office also predicted that U.S. gross domestic product will increase by 7.4% in 2021, a figure that is above the Federal Reserve’s prediction of 7% growth. The CBO said that real GDP will average 2.8% during the five-year period from 2021 to 2025.

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In terms of unemployment, the CBO’s update projects that it will come in at 4.6% this year before sinking down to 3.6% next year, a level similar to the U.S. economy in the weeks leading up to the coronavirus pandemic. U.S. unemployment stands at 5.8%, according to the Bureau of Labor Statistics.

The CBO foresees the consumer price index jumping 3.4% in 2021 before hovering at 2.3% for 2022 and 2023 and then slightly edging up to a 2.4% annual average for the rest of the coming decade. The 2021 prediction is on par with the Fed, but the CBO’s inflation forecast for the following years is higher than the central bank, which projects a more modest 2.1% in 2022 and 2% in the longer term.

Inflationary concerns have been percolating among economists after rounds of federal spending flooded the economy with cash during the pandemic and as demand for goods continues to grow daily as the country emerges from its pandemic-induced slump.

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President Joe Biden jammed through a $1.9 trillion spending package earlier this year designed to provide relief for those affected by COVID-19, and he is planning at least two additional plans: an infrastructure package and a spending proposal designed to benefit families.

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