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US budget deficit hits $2.77 trillion in 2021, 2nd highest

In this May 4, 2021, photo, the Treasury Building is viewed in Washington. The Treasury Department says that the economic and financial sanctions the United States has employed over the past two decades to battle global terrorism, nuclear proliferation, drug cartels and other threats need to adapt to a rapidly changing financial world. The department issued a report Monday, Oct. 18, 2021, that said it needs to modernize the technology it uses and upgrade its workforce to deal with new tools and techniques, such as digital currencies. (AP Photo/Patrick Semansky, file)
In this May 4, 2021, photo, the Treasury Building is viewed in Washington. The Treasury Department says that the economic and financial sanctions the United States has employed over the past two decades to battle global terrorism, nuclear proliferation, drug cartels and other threats need to adapt to a rapidly changing financial world. The department issued a report Monday, Oct. 18, 2021, that said it needs to modernize the technology it uses and upgrade its workforce to deal with new tools and techniques, such as digital currencies. (AP Photo/Patrick Semansky, file) In this May 4, 2021, photo, the Treasury Building is viewed in Washington. The Treasury Department says that the economic and financial sanctions the United States has employed over the past two decades to battle global terrorism, nuclear proliferation, drug cartels and other threats need to adapt to a rapidly changing financial world. The department issued a report Monday, Oct. 18, 2021, that said it needs to modernize the technology it uses and upgrade its workforce to deal with new tools and techniques, such as digital currencies. (AP Photo/Patrick Semansky, file)

By MARTIN CRUTSINGER / Associated Press 4 min read

WASHINGTON (AP) – The U.S. budget deficit totaled $2.77 trillion for 2021, the second highest on record but an improvement from the all-time high of $3.13 trillion reached in 2020. The deficits in both years reflect trillions of dollars in government spending to counteract the devastating effects of a global pandemic.

The Biden administration said Friday that deficit for the budget year that ended Sept. 30 was $360 billion lower than 2020, as a recovering economy boosted revenues, helping to offset government spending from pandemic relief efforts.

Before the deficit ballooned during two years of a global pandemic, the biggest deficit had been a shortfall of $1.4 trillion in 2009. At that time, the U.S. was spending heavily to lift the country out of a severe recession following the 2008 financial crisis.

As a percentage of the overall economy, as measured by the gross domestic product, the 2021 deficit represents 12.4% of GDP, down from the 2020 deficit, which was 15% of GDP.

The 2020 deficit was the highest in relation to the overall economy since World War II, when it hit 29.6% of GDP in 1943 as the United States was borrowing heavily to finance the war effort. Those figures remained elevated at 22.2% of GDP in 1944 and 21% of GDP in 1945 before beginning to retreat once the war was won.