US budget deficit hits $3 trillion record

The deficit is more than double the previous 11-month record set in the aftermath of the 2008 financial crisis

Coronavirus has forced many US businesses, such as the Century 21 department store, to shutter. AFP

The US budget deficit hit an all-time high of $3 trillion for the first 11 months of this budget year, the Treasury Department said on Friday.

The ocean of red ink is a product of the government's massive spending to try to cushion the impact of a coronavirus-fuelled recession that has cost millions of jobs.

The deficit from October through to August is more than double the previous 11-month record of $1.37 billion set in 2009 in the aftermath of the 2008 financial crisis.

With one month to go in the 2020 budget year, which ends September 30, the deficit could go even higher.

The Congressional Budget Office is forecasting the deficit this year will hit a record $3.3 trillion. Next year, it predicts the deficit will exceed 100 per cent of gross domestic product - a level not seen since the huge government debt buildup in the 1940s to pay for fighting World War II

This chart shows its 10-year budget forecast.

The government often runs surpluses in September so it is possible the final figure for this year could come in just under $3 trillion - but with so many people still out of work and so many businesses struggling to reopen, the economic recovery could wither by late this year.

On the brighter side, even with huge amounts of debt being added, the government’s interest costs to finance the debt are actually down 10 per cent this year to $484 billion due to lower interest rates.