The federal budget deficit was $2.8 trillion in fiscal year 2021, the Congressional Budget Office estimates—$362 billion less than the deficit recorded in fiscal year 2020. Although outlays rose by an estimated $265 billion (or 4 percent), revenues rose more—by an estimated $627 billion (or 18 percent).
Programs and policies implemented in response to the coronavirus pandemic—notably, refundable tax credits (particularly the recovery rebates), expanded unemployment compensation, and the Small Business Administration’s Paycheck Protection Program—substantially boosted spending, in both 2021 and 2020. Outlays in fiscal year 2021 were about $2.4 trillion more than spending in 2019, an increase of more than 50 percent. Outlays in 2020 rose almost as much. As a result, the annual deficits recorded in 2020 and 2021 were significantly larger than the $984 billion shortfall recorded in fiscal year 2019.
The deficit CBO now estimates for 2021 is $233 billion smaller than the shortfall estimated in its most recent baseline projections. Since CBO completed that estimate, income tax receipts have been greater than anticipated and outlays have been largely consistent with CBO’s projections.