Federal budget deficit could shrink to $1 trillion this year, CBO says

 (CNN) — The US budget deficit could shrink to $1 trillion this year from $2.8 trillion last year as federal spending on Covid-19 aid slows and the economy rebounds, the nonpartisan Congressional Budget Office said Wednesday.

Despite the reduction, the federal deficit remains “large by historical standards” and is expected to increase over the next decade, according to a statement from CBO Director Phillip Swagel.

The CBO projects that the deficit will decrease again next year, but then increase to 6.1% of gross domestic product by 2032 — significantly larger than the 3.5% of GDP that deficits have averaged over the past 50 years.

The federal deficit hit a record high of more than $3 trillion in fiscal year 2020 when the Covid-19 pandemic hit. The government spent more than $2 trillion that year in pandemic aid, including expanding unemployment benefits and increasing lending to small businesses — approved by legislation signed into law by former President Donald Trump. Congress authorized another $1.9 trillion in response to the pandemic in 2021, legislation pushed by the Biden administration.

The CBO also predicts that elevated inflation will persist through 2022.