WASHINGTON—There were only rumors of a possible $1 trillion economic stimulus package on March 12 when U.S. Comptroller General Gene Dodaro urgently warned the Senate Budget Committee that federal spending and debt are on an “unsustainable” path.
Dodaro got right to the point at the outset of his testimony:
“I am concerned because our debt-to-gross domestic product (GDP) ratio as of the end of the last fiscal year was 79 percent. That’s the highest it’s been since World War II, when we hit the historic high of 106 percent,” Dodaro said.
“So we are very heavily leveraged in debt at a time when we are going to be facing a steady annual deficit of a trillion dollars a year for as far as the eye can see.”
He was referring to the fact the national debt now exceeds $23 trillion ($122 trillion if unfunded obligations such as those of Social Security and Medicare are included).
That $23 trillion currently equals 109 percent of the 2019 GDP of $21.4 trillion. But interest costs more each year as the national debt goes up and the Government Accountability Office projects those costs to exceed total non-defense discretionary federal spending by 2024, go beyond defense spending the next year, and blow past Medicare in 2042 and Social Security in 2046.
“This is why we believe the current path is unsustainable,” Dodaro said.
Five days later, amid an intensifying worldwide crisis occasioned by the CCP virus, Treasury Secretary Steven Mnuchin confirmed that President Donald Trump wants Congress to pass an economic stimulus package that will cost at least $1 trillion.
“It is a big number. This is a very unique situation in this economy,” said Treasury Secretary Steven Mnuchin. “We put a proposal on the table that would inject $1 trillion into the economy. That is on top of the $300 billion from the IRS deferrals.
“Now let me just say, this is a combination of loans, this a combination of direct checks to individuals, this is a combination of creating liquidity for small businesses.
“You can think of this as business interruption money. The president is determined to put money back into this economy to protect hard-working Americans and small businesses.”
About half of the funds will go to individuals and families based on reported income from 2018, with most of the other half being loans made available to corporations and small businesses primarily for the purpose of keeping payrolls as intact as possible during the crisis.
Details are still being worked out in negotiations between the Trump White House and congressional leaders from both parties.
Asked by a reporter if Congress should be concerned about rising deficits, Mnuchin demurred, saying: “I think Congress right now should be concerned about American workers and small businesses. You know interest rates are incredibly low right now, so there’s very little cost of borrowing this money, and, as I’ve said, in different times, we’ll fix the deficit, but this is not the time to worry about it.”
Even so, the $1 trillion stimulus package raised eyebrows, especially as more details became known. The budget committee has asked the Congressional Budget Office (CBO) for an assessment of the package’s impact on the government’s financial health, according to a senior Senate aide who asked not to be identified.
The conservative Heritage Foundation released an analysis warning that “any action that Congress takes should be targeted, temporary, and linked directly to the coronavirus epidemic in order to address the source of the economic shock, while limiting any political abuse that can develop in a moment of crisis.”
“Unfortunately, the Senate’s coronavirus bill, the Coronavirus Aid, Relief, and Economic Security Act, misses this mark by including special benefits to specific industries that will exceed $200 billion,” it said.
Truth in Accounting President Sheila Weinberg told The Epoch Times that it appears “the federal government is going to cover trillions of dollars of other losses and costs, including those for business interruption, personal income loss, and health care costs.”
“This type of coverage is what insurance companies do, but not at this scale,” Weinberg said.
“The federal government requires insurance companies to have reserves to meet their customers’ benefits. Since the federal government has become a multitrillion-dollar insurance company, it should have reserves to cover the costs of crisis. Instead, the government is $23 trillion in debt (plus another $100 trillion for unfunded Social Security and Medicare benefits).”
The Epoch Times refers to the novel coronavirus, which causes the disease COVID-19, as the CCP virus because the Chinese Communist Party’s coverup and mismanagement allowed the virus to spread throughout China and create a global pandemic.
Contact Mark Tapscott at Mark.Tapscott@epochtimes.nyc