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The numbers: The federal government’s budget deficit widened to $311 billion in February from $235 billion in the same month last year, the Treasury Department reported Wednesday.
Economists surveyed by the Wall Street Journal had expected the deficit to widen to $255 billion in February.
The deficit is a record for the month.
What happened: Total spending was $559 billion in February, up 32% from the prior year. Spending went up on unemployment benefits from the Labor Department and spending by the Health and Human Services. The government is not keeping track of all the money spent to fight COVID-19 pandemic.
Total receipts also rose 32% in February to $248 billion.
For the fiscal year to date, the budget deficit swelled to $1 trillion compared with $624 billion over the same period a year ago.
The big picture: Experts said the U.S. is set to run $3 trillion deficits for two years in a row. The government continues a spending spree, with Congress set to pass a $1.9 trillion Covid relief package later Wednesday. After that, the Biden Administration is expected to soon announce a “Build Back Better” infrastructure and green-energy measure that could cost between $1 to $3 trillion.
Tom Simons, economist at Jefferies, said Treasury doesn’t need to further increase borrowing as a result of the $1.9 trillion package. He said the coupon calendar still raises an enormous amount of cash due to the cumulative increases in auction sizes since last April.
“It used to take us years to borrow $1 trillion. Now we’re borrowing that much in just five months,” noted Maya MacGuineas, president of the Committee for a Responsible Federal Budget.
The Congressional Budget Office warned last week that rising government debt raised long-run concerns about a financial crisis.
During her confirmation hearing. Treasury Secretary Janet Yellen said that it will be “essential” to put the federal budget on a path to sustainability, but she said the government should first defeat the pandemic and make long-term infrastructure investments to help the economy grow. Low interest rates have kept the interest burden on the debt low. The government has spent $192 billion on interest on the federal debt so far this fiscal year, which begins in October. That’s down from $229 billion over the same period last year as the government’s cost of borrowing has dropped, a senior Treasury official said.
Market reaction: After rising above 1.6% earlier this week, the yield on the 10-year Treasury note TMUBMUSD10Y, 1.504% has retreated to 1.516% in Wednesday’s session. An earlier government report on February consumer prices on Wednesday eased the market’s worries about inflation.
