U.S. posted record high deficit for the month as outlays heightened due to aid

The Treasury Department on Monday said that the direct payments to Americans under President Biden’s stimulus package had a great impact on the country’s economy as the government posted a deficit of $660 billion, a record high for the month.

The first six months of the 2021 fiscal year showed a deficit of $1.706 trillion, comparing to a comparable year-earlier period of deficit of $743 billion.

As per the Treasury officials, the Covid-19 didn’t affect much during the early months of the 2020 fiscal year but as time passed and with the increase in pandemic-related lockdowns and rising unemployment and major new aid spending didn’t start till March 2020 and banked up in the following month.

March 2021 deficit surpassed the June 2020 and April 2020 deficit by the gaps of $864 billion and $738 billion respectively.

The month also witnessed the increase in receipts by 13% which was a result of an increase in tax rates for the higher-paid Americans who were able to work remotely, as per the Treasury official. Also from the improved overall employment compared to the second half of March 2020, when the employment rate was dropped hugely.

Further, the outlays of March increased mainly due to the direct payment of $1400 to Americans, under Biden’s American Rescue Plan Act, amounting to $339 billion.

The official added that more funding from $1.9 trillion was expected to roll out in the coming month, which will keep outlays at a growing rate.

Outlays for the first six months of fiscal 2021 was a record $3.410 trillion, while receipts were $1.704 trillion, as per the treasury officials. Total direct payments in the six-month period were $487 billion, including the stimulus package passed under President Trump.