The Treasury Department expects to issue $1.3 trillion in new debt between July and the end of fiscal year 2021, comprising $1.16 trillion in short-term bills and $145 billion in long-term debt, according to projections released Monday. While this is only slightly less than the $1.4 trillion in debt issued between April and September, the new borrowing comes at a time when the Federal Reserve is expected to slow the pace of its quantitative easing program.
WASHINGTON – The U.S. plans to borrow nearly $1.3 trillion over the next two quarters as federal spending increases following the approval of the Covid 19 aid package in March, the U.S. Treasury Department said Monday.
This would bring the total debt for the year ending 30. The fiscal year ending in September is $2.3 trillion, compared with $4 trillion in the previous fiscal year, when a pandemic plunged the U.S. into a recession that led to record deficits.
The Treasury Department estimates the government will borrow $463 billion this quarter, nearly five times the $95 billion estimated before Congress approved the $1.9 trillion bailout. Yet this is only a fraction of what the United States borrowed during the same period last year, from April to June, when extraordinary pandemic spending and low tax revenues exploded the deficit and pushed total debt to $2.7 trillion.
The Treasury Department also estimated that net market absorption from July to September would be $821 billion if Congress approves the suspension of the federal borrowing limit on January 1. August is okay.
This year, Congress approved a new increase in federal spending that economists expect will fuel the economic recovery through the end of 2021. These include a $1,400 economic stimulus check for most Americans, resources for small businesses, support for state and local governments, and higher unemployment benefits. This decision was made after the approval in December of a rescue package worth about $900 billion.
The Committee for a Responsible Federal Budget estimates that federal debt will reach 108% of gross domestic product, the highest level since World War II.
The growing red ink is at the center of a debate in Washington over how much more government spending the U.S. economy needs. Most Republicans who have supported tax cuts at the expense of the deficit under the Trump administration are opposed to borrowing more money while the economy is already showing signs of improvement.
Officials from the Biden administration and Democrats have argued that the $1.9 trillion aid proposal would help speed the recovery, along with more vaccine distribution.
Recent data suggest that the economy is on the way back to its pre-pandemic state: Last week, the Commerce Department reported that gross domestic product grew 6.4% in the first quarter on a seasonally adjusted annualized basis, leaving the economy just 1% away from its late 2019 peak.
The economy appears to be picking up, said Catherine Wolfram, assistant secretary of the Treasury for economic policy. Underlying domestic demand from consumers, businesses and manufacturers, driven by fiscal policy, has proved resilient despite many obstacles.
Email Kate Davidson at [email protected]
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Appeared in the May 4, 2021 print edition, when the U.S. takes on $1.3 trillion in debt over the next two quarters.
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