The U.S. Treasury announced Aug. 3 that it expects to borrow $2.16 trillion in the second half of 2020, with $1 trillion of that linked to anticipation that Congress will pass more legislation to fight COVID-19.
The Treasury said in a release that it expects to borrow $947 billion in the July–September quarter, and $1.216 trillion in the October–December 2020 quarter.
Borrowing for the three final quarters of the 2020 calendar year, or April–December 2020, which excludes the pre-pandemic first quarter, is expected to come in at $4.916 trillion.
The Treasury said it would be borrowing $270 billion more in the July–September quarter than it initially predicted in May. The upward revision is mostly driven by higher expenditures, the department said, partly due to a shift from the prior quarter and partly due to anticipated new legislation.
The revised estimates “assume $1 trillion of additional borrowing need in anticipation of additional legislation being passed in response to the COVID-19 outbreak,” the Treasury said in the statement.
Since March, Congress has authorized around $3.6 trillion in new spending to help American families and businesses weather the fallout from the pandemic, which has sparked an economic contraction of historic proportions.
The U.S. economy contracted by a staggering 32.9 percent annualized rate in the second quarter, more than triple the previous all-time gross domestic product drop of 10 percent in the second quarter of 1958.
The unemployment rate shot up from a 50-year low of 3.5 percent in February to 14.7 percent in April, recovering to 11.1 percent in June as total nonfarm payroll employment rose by 4.8 million.
Congressional leaders and the White House are in talks over the next relief package, with Democrats pushing for a broad fiscal aid bill estimated at around $3.5 trillion that includes aid for state and local governments, food stamp increases, and assistance to renters and homeowners. Many Republicans, concerned about rising levels of debt, have argued for a slimmer aid package of around $1 trillion, with Treasury Secretary Steven Mnuchin telling reporters on Aug. 2, “We have to be careful about not piling on enormous amounts of debt for future generations.”
Areas of agreement include another round of $1,200 direct payments to American families and changes to the Paycheck Protection Program, the small business relief measure, that will allow especially hard-hit businesses to receive more loans under generous forgiveness terms.
Multiple obstacles remain, including an impasse on extending the enhanced $600-per-week pandemic unemployment benefit, which lapsed on July 31. Republicans are broadly willing to extend a slimmed-down version for a shorter term, while Democrats have been pushing for a full extension through January 2021.
“The $600 unemployment insurance benefit is essential because there are no jobs to go back to,” House Democratic Caucus Chair Hakeem Jeffries (D-N.Y.) told MSNBC on Aug. 4. “We’ve got to help out everyday Americans. That’s a line in the sand.”
Republicans have proposed an immediate cut to $200 and then replacing the benefit with a system that would provide 70 percent of a worker’s “replacement wage.” Their concern is that the current benefit is so generous as to discourage many unemployed workers from returning to work, driving up labor costs, which disproportionately hurts small businesses.