The federal budget deficit widened to a record $738 billion in April as the government’s efforts to combat the coronavirus pandemic led to massive levels of new spending and sharply lower tax collections, the Treasury Department said Tuesday.

In April, the federal government spent about $980 billion but brought in only $242 billion in new tax revenue. In the past two months, lawmakers have approved almost $3 trillion in emergency relief in response to the downturn and postponed certain tax requirements for businesses and individuals. Previously, deficits of $1 trillion for an entire year were considered unusually high.

Independent analysts have projected the annual deficit could exceed $4 trillion by the end of this fiscal year, which concludes at the end of September. Lawmakers are already at work on a fifth relief package as unemployment rises to levels not seen since the Great Depression.

“We have run $1 trillion deficits annually only four times in American history. At this point in the pandemic and recession, we are looking at costs of close to $1 trillion per month,” said Brian Riedl, a policy analyst at the libertarian-leaning Manhattan Institute.

The deficits for April were driven primarily by an increase in spending. The U.S. spent $980 billion in April 2020. This was largely a result of the Cares Act, which Congress approved in late March. In April 2019, the government spent just $375 billion.

Because the government spends more money than it brings in through revenue, it borrows money to cover the difference by issuing debt. The Treasury Department recently said it planned to borrow $3 trillion between April and June to cover all of its new planned spending.

Typically, even when deficits are high, the U.S. runs a surplus in April as millions of Americans pay their taxes to the IRS. But this year, the Treasury Department postponed many taxes until July, and a sharp economic contraction is also expected to dry up new revenue.

Numerous economists argue that additional spending is necessary, as the threat of inflation remains low and Americans across the country are hit by economic hardship.

“Every dollar of deficit spending is absolutely worth it. Congress is the only one that does not have to balance its budget today,” said Claudia Sahm, the director of macroeconomic policy at the Washington Center for Equitable Growth. “If Congress does not spend trillions more, we will pay for their error for a generation.”

The new deficit projections come as senior White House officials increasingly balk at the hefty cost of the efforts to fight the virus, while House Speaker Nancy Pelosi, D-Calif., introduces a new spending package that would cost more than $3 trillion.

Numerous economists argue that additional spending is necessary because the threat of inflation remains low and Americans across the country are hit by economic hardship.

“Every dollar of deficit spending is absolutely worth it. Congress is the only one that does not have to balance its budget today,” said Claudia Sahm, an economist at the Washington Center for Equitable Growth. “If Congress does not spend trillions more, we will pay for their error for a generation.”


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