WASHINGTON (AFP) – Massive government rescue payments to help businesses and households survive the economic hit from the coronavirus drove a record surge in the United States (US) deficit last month, the Treasury Department said on Monday.
“Driven by the impact of the COVID-19 outbreak and government response, the deficit for June 2020 was USD864 billion, compared to USD8 billion in June 2019,” Treasury said in its monthly report statement.
That was well past the previous record of USD234 billion set in February 2009 at the start of the global financial crisis.
With outlays in June surging to USD1.1 trillion and receipts falling, the funding gap in the first nine months of the current fiscal year soared 267 per cent compared to a year earlier, hitting USD2.74 trillion, Treasury said.
“More than half of this increase was due to a USD511 billion increase in Small Business Administration budget outlays, primarily for the Paycheck Protection Program (PPP).”
The payments were part of the unprecedented USD2.2 trillion CARES Act, which provided aid for businesses of all sizes as well as direct payment to US taxpayers and expanded unemployment benefits.
The weekly payments of USD600 to help the millions laid off as the economy shut down have so far amounted to USD171 billion.
Given the crisis caused by the pandemic, the exploding deficit came as no surprise. Treasury in May announced it was planning to borrow a record USD3 trillion in the April-June period to fund the relief programmes.
And the department said on Monday that further cash expenditures “for loan forgiveness under PPP will occur in subsequent months”.