WASHINGTON — Spend what it takes, Washington said as it confronted the coronavirus. Well over $2 trillion later, it’s unclear where that spending will end.
One of the lasting legacies of the coronavirus pandemic will be staggering debts and deficits on the U.S. balance sheet, with shortfalls hitting levels that would have been unthinkable just a few decades ago.
It’s a fiscal clamp that is likely to persist for a generation, or even into perpetuity, with debt levels having passed the point of easy return in a capital where lawmakers are increasingly incapable, or unwilling, to constrain them.
The latest, and dire, projection from the Congressional Budget Office, released Friday, states the U.S. deficits will mushroom to $3.7 trillion in 2020, fueled by the four coronavirus relief bills signed into law by President Donald Trump. A fifth bill is already in the works, and will be “expensive,” according to House Speaker Nancy Pelosi, D-Calif.
The deficit for 2021 is estimated to tally $2.1 trillion, double previous CBO estimates.
The report predicts a devastating hit to the economy this quarter at an annualized rate of decline of 40 percent — probably the sharpest economic shock ever — accompanied by a 15 percent unemployment rate this spring and summer. For the entire year, the economy is predicted to shrink by 5.6 percent.
CBO Director Phillip Swagel cautioned that there is “enormous uncertainty” to the projections, given the unprecedented nature of the crisis, but it’s plain the economic shock is unlike anything seen since the Great Depression.
“Challenges in the economy and the labor market are expected to persist for some time,” Swagel wrote in a blog post. He said the economy is likely to begin rebounding in the third quarter, but the jobless rate will remain about 10 percent by the end of 2021.
On the government front, coronavirus-related figures point to red ink unparalleled since World War II. Economists generally say the most significant measure of debt and deficits is to compare it against the size of the economy, and by that measure the debt is soon to rival the record. CBO says publicly held debt will reach 101 percent of gross domestic product by the end of this year, just below the post-war high.
The deficit was entrenched long before the virus, with federal revenues shrinking to well below historic averages and the spending side of the ledger rising thanks to record Pentagon expenditures and the addition of baby boomers to Medicare and Social Security.
Even Washington’s few remaining spending hawks say red ink should not be a focus for now as the government faces unemployment levels not seen since the Great Depression and shutdown orders lasting well into next month or beyond.
