The massive government rescue payments to help businesses and households survive the economic hit from the coronavirus pandemic drove a surge in the US deficit last month, the Treasury Department said Monday.
With outlays in June surging to $1.1 trillion and receipts falling, the funding gap in the first nine months of the current fiscal year soared 267 percent compared to a year earlier, hitting $2.74 trillion, Treasury said.
“Driven by the impact of the COVID-19 outbreak and government response, the deficit for June 2020 was $864 billion, compared to $8 billion in June 2019,” Treasury said in the monthly report statement.
“More than half of this increase was due to a $511 billion increase in Small Business Administration budget outlays, primarily for the Paycheck Protection Program (PPP).”
The payments were part of the unprecedented $2.2 trillion CARES Act which provided aid for businesses of all sizes, as well as direct payment to US taxpayers and expanded unemployment benefits.
Given the crisis caused by the shutdown of the economy, the exploding deficit came as no surprise. Treasury in May announced it was planning to borrow a record $3 trillion in the April-June period to fund the relief programs.
And the department said Monday that further cash expenditures “for loan forgiveness under PPP will occur in subsequent months.”
In June 2019, US government spending was just $342 billion, and the deficit for the October 2018-June 2019 period was only $747 billion, Treasury said.