Advertisement

Updated April 25th, 2020 at 11:12 IST

US Congress pegs Covid-hit to federal budget deficit at figure rivaling Germany's GDP

A recession caused by the coronavirus pandemic and a government spending spree on testing, health care and aid to businesses and households will nearly quadruple the federal budget deficit to USD 3.7 trillion, the Congressional Budget Office said Friday.

| Image:self
Advertisement

A recession caused by the coronavirus pandemic and a government spending spree on testing, health care and aid to businesses and households will nearly quadruple the federal budget deficit to USD 3.7 trillion, the Congressional Budget Office said Friday. Among the legacies of the outbreak, a CBO report says, is a pile of trillions of dollars of debt, amassed by a political system that has proved incapable of taking even small steps to constrain this problem.

The 2020 budget deficit will explode after four coronavirus response bills passed by Congress and signed by President Donald Trump promise to pile more than USD 2 trillion onto the USD 24.6 trillion national debt in just the remaining six months of the current fiscal year, according to the report. That's more than double the deficit record set during President Barack Obama's first year in office.

The CBO said lawmakers eventually will be forced to tackle the government's chronic financial woes, if for no other reason than the looming insolvency of Social Security and Medicare. The report is full of gloomy economic news, predicting a devastating hit to the economy this quarter at an annualized rate of decline of 40 per cent, accompanied by a 14 per cent unemployment rate. Coronavirus-related federal debt and deficit figures are pointing to government red ink unparalleled since World War II.

One lasting worry is the further shrinking of revenues that already were well below historic averages, even as the spending side of the federal ledger climbs due to the retirement costs of the baby boomers to Medicare and Social Security, record Pentagon spending and long-term COVID-19 response costs.

Even Washington's few remaining spending hawks say the flood of red ink should not be a focus in the short term as the government takes unprecedented steps to respond to a shrinking economy, unemployment levels not seen since the Great Depression, and shutdown orders lasting well into next month or beyond.

But when policymakers inevitably are forced to take on deficits, virtually none of them will have any experience in successfully doing so. Congress has not passed a major attack on the deficit since the hard-won 1997 law that capped a decade's worth of politically costly but ultimately effective reduction measures. The era of successful action to tackle debt and deficits ended more than two decades ago. In the interim, a divisive brand of politics has taken hold, making the kind of painful sacrifices required to even dent the deficit virtually impossible to pull off.

What's more, no one has even seriously tried since a failed effort by former GOP Speaker John Boehner of Ohio and Obama almost a decade ago. There's no agreement on what levels of debt and deficits are sustainable. The government has run large deficits for well over a decade without the predicted increase in interest rates, economic stagnation, or a European-style fiscal crisis. 

Advertisement

Published April 25th, 2020 at 11:12 IST

Your Voice. Now Direct.

Send us your views, we’ll publish them. This section is moderated.

Advertisement
Advertisement

Trending Quicks

Jerome Powell
3 minutes ago
RCB vs KKR
10 minutes ago
Mukhtar Ansari Death
12 minutes ago
US Federal Reserve
19 minutes ago
Team Legend
31 minutes ago
Brij Bhushan and Sanjay Singh
32 minutes ago
Mani Ratnam
33 minutes ago
Lok Sabha Elections 2024
37 minutes ago
The Surprising Benefits of Video Games Beyond Just Entertainment
38 minutes ago
Alia Bhatt
41 minutes ago
Advertisement
Advertisement
Advertisement
Whatsapp logo