WASHINGTON (AP) — The US federal government incurred the biggest monthly budget deficit in history in June as spending on programmes to combat the coronavirus recession exploded while millions of job losses cut into tax revenues.

The Treasury Department reported Monday (July 13) that the deficit hit US$864 billion last month, an amount of red ink that surpasses most annual deficits in the nation’s history and is above the previous monthly deficit record of US$738 billion in April. That amount was also tied to the trillions of dollars Congress has provided to cushion the impact of the widespread shutdowns that occurred in an effort to limit the spread of the viral pandemic.

For the first nine months of this budget year, which began October 1, the deficit totals US$2.74 trillion, also a record for that period. That puts the country well on the way to hitting the US$3.7 trillion deficit for the whole year that has been forecast by the Congressional Budget Office (CBO).

That total would surpass the previous annual record of US$1.4 trillion set in 2009 when the Government was spending heavily to lift the country out of the recession caused by the 2008 financial crisis.

The June deficit was driven higher by spending on various government relief programmes such as an extra US$600 per week in expanded unemployment benefits and a Paycheck Protection Program that provided support to businesses to keep workers on their payrolls.

The report showed that the cost of the Paycheck Protection Program in June was US$511 billion. That reflected a charge to the Government for all the bank loans made under the programme even though the Government will not actually have to pay out funds until the banks determine whether the businesses met the criteria for having the loans forgiven. Those requirements include spending at least 60 per cent of the loan amount on worker pay with the other 40 per cent going to overhead costs such as rent and utilities.

Another reason for the surge in the June deficit was the Government’s decision to delay tax payments this year until July 15.

That decision mean that quarterly payments made by individual taxpayers and corporations will not be due until July 15 this year rather than June.

So far this budget year, revenues total US$2.26 trillion, down 13.4 per cent from the same period last year, while spending totals US$5 trillion, up 49.1 per cent from a year ago.

The CBO estimate of a US$3.7 trillion deficit for this year could go higher depending on the course of the economy. The country fell into a deep recession in February, ending a record long expansion of nearly 11 years. The Trump Aministration is predicting that the economy will come roaring back in second half of this year but many private forecasters are concerned that a resurgence of virus cases could make consumers too fearful to resume spending, which drives 70 per cent of the economy.