Exploding federal spending prompted by the U.S. government’s response to the CCP virus pandemic will force the annual deficit to at least $3.8 trillion this year, according to projections by the Committee for a Responsible Federal Budget (CFRB).
“Our latest projections find that under current law, budget deficits will total more than $3.8 trillion, 18.7 percent of Gross Domestic Product (GDP), this year and $2.1 trillion (9.7 percent of GDP) in 2021,” the CFRB said in a statement.
“We project debt held by the public will exceed the size of the economy by the end of Fiscal Year 2020 and eclipse the prior record set after World War II by 2023,” the group stated.
The national debt is currently $24.3 trillion, according to the U.S. National Debt Clock, and the currently projected value of the economy is $22.3 trillion. The debt figure doesn’t include unfunded future benefits the government is liable for under the Social Security ($37.6 trillion) and Medicare ($52.7 trillion) entitlement programs.
The group cautioned, however, that the actual numbers are likely to be worse at the end of the current fiscal year on Sept. 30, “since they assume no further legislation is enacted to address the crisis and that policymakers stick to current law when it comes to other tax and spending policies.”
In addition, the group said its projections “also assume the economy experiences a strong recovery in 2021 and fully returns to its pre-crisis trajectory by 2025. Assuming a slower and weaker recovery (but no changes in law), we estimate debt would grow to 117 percent of GDP by 2025.”
Previously, the highest federal deficit as a percentage of GDP came in 1943 during World War II when it reached 29.6 percent, according to the CFRB.
Thus far in 2020, Congress has enacted and President Donald Trump has signed into law three separate acts to establish a multiplicity of new programs and regulations designed to stem the spread of the CCP virus, commonly known as the novel coronavirus, and to help the U.S. economy recover from the massive lockdown that authorities ordered in March.
The first CCP virus law, an emergency funding bill, was enacted in early March at a cost of $8.3 billion, followed in mid-month by a second law, the Families First Coronavirus Response Act, costing $196 billion.
Those two measures were dwarfed at the end of March by the $2.2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act, the most expensive single law in the history of the country.
Trump and multiple congressional leaders are also beginning to debate what they think should be included in a fourth recovery bill. An attempt by Senate Republicans last week to add $250 billion in small business loans to the CARES Act was blocked by Democrats.
Congressional Republicans are advocating for additional measures targeted to specific groups such as small business, while Democrats in Congress see the recovery legislation as an opportunity to benefit particular special interests that are unrelated to the pandemic.
“These policies would further increase deficit and debt levels. For example, if policymakers end up spending another $1 trillion per year over the next three years on additional stimulus measures, debt as a percentage of GDP would be about 12 percentage points higher by 2025,” CFRB warned.
“If policymakers use the current crisis as an excuse to enact a number of permanent and unrelated policies, debt could grow even higher and larger deficits would persist in perpetuity.”
“At some point, such high and rising deficits and debt levels will prove unsustainable, and corrective action will be needed,” CFRB continued. “Putting long-term deficit reduction measures in place sooner rather than later would allow policymakers to phase in changes more gradually and give those affected more warning and ability to prepare.”