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Getty Images The federal government’s budget deficit is likely rise even higher than expected in the current fiscal year as Washington readies more spending and tax breaks to combat an economic slowdown tied to the coronavirus.
The numbers: The U.S. budget deficit rose slightly in February to $235 billion, but it’s running 15% above last year’s level and likely to go higher still if Washington tries to stimulate the economy to counter the coronavirus threat.
The U.S. budget gap rose just 1% in February, the Treasury Department said Wednesday.
Yet the deficit has totaled a larger $625 billion through the first five months of fiscal 2020 versus $544 billion in the same span during fiscal 2019. The current fiscal year began last October and ends next September.
In all likelihood, the deficit will increase even more than anticipated if Washington, as expected, offers more tax cuts or spending initiatives to prop up the economy. Tax receipts could also fall if business profits decline.
Even before the added stimulus, the Congressional Budget Office has estimated the deficit would top $1 trillion in fiscal 2020 for the first time in eight years.
What happened: Spending for the month rose 5% to $423 billion compared with a year earlier.
The government took in $188 billion in taxes and other revenue, up 12% from a year ago. Last year, the U.S. budget deficit registered $984 billion.
Big picture: A rising budget deficit is simply not on Wall Street or Washington’s radar right now. The entire focus is on whether the government can stop the spread of the coronavirus and limit the damage to the economy.
Market reaction: The Dow Jones Industrial Average DJIA, -5.69% and S&P 500 SPX, -5.03% tumbled again in Wednesday trades. The Dow briefly fell more than 1,400
Prices have gyrated wildly in the past few days, surging 1,167 points on Tuesday after sinking 2,013 points on Monday. Investors worry that more coronavirus cases in the U.S. will cause the economy to slump.
