Budget Deficit

A Trillion-Dollar Deficit This Year Is Now Officially the Best Case Scenario

The coronavirus is going to crater tax revenues and hike spending. And the Congressional Budget Office says the deficit was going to exceed $1 trillion even before all that.

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As policymakers in Washington continue debating the finer points of what is shaping up to be a $1 trillion coronavirus rescue package, the Congressional Budget Office (CBO) on Thursday offered up a reminder that the nation's credit card was already close to being maxed out.

The CBO's latest 10-year budget projection—which takes into account policies enacted through March 6, and therefore excludes any coronavirus response measures—forecasts a $1.07 trillion gap between how much the government will spend and how much it will take in this year. The deficit will continue to grow in coming years, according to the CBO, until hitting $1.7 trillion in 2030. By then, the national debt will exceed $30 trillion and will be roughly equal to the size of the entire U.S. economy for the first time since the end of World War II.

As bad as all that sounds, it is now an almost impossibly optimistic scenario.

The United States appears to be tilting towards a severe economic downturn. The Trump administration is reportedly preparing for unemployment to hit 20 percent—though Treasury Secretary Steve Mnuchin has denied those reports—amid the COVID-19 outbreak and as a consequence of mandatory "social distancing" measures taken to slow its spread. Major stock indices have fallen by as much as 30 percent in the past month.

Taken together, those things will crater tax revenue from all angles. A surge in federal spending, meanwhile, is all but guaranteed. That's a recipe for higher deficits.

Maybe much higher deficits: the Committee for a Responsible Federal Budget, a nonprofit that advocates for the government to balance its books, says the coronavirus crisis may cause current deficits to double this year.

If that happens, the real culprit is not the disease outbreak or even the government's response to it. The blame falls squarely on federal policymakers from both parties who allowed the deficit to boom in recent years. They are the ones who ignored or laughed off warnings about the rising debt

"It is frustrating to see the picture the CBO's latest baseline paints of the hole that we put ourselves in right at the time when we need as much fiscal flexibility as possible," says Maya MacGuineas, the CRFB's president. "As we move—hopefully quickly—to provide the support to assist with this crisis, it's worth keeping in mind why fiscal responsibility matters. Manageable debt during good times puts us in the best possible position to borrow in the times of need."

Instead, during the final three years of the longest run of uninterrupted economic growth in U.S. history, the budget deficit doubled. Now, it's going to explode.

NEXT: Russia Fights Coronavirus With Price Controls, Travel Restrictions

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  1. https://markets.businessinsider.com/news/stocks/us-deficit-tops-trillion-first-time-since-2012-trump-promise-2019-9-1028524507

    Trump promised to get rid of the deficit in 8 years. But it just topped $1 trillion for the first time since 2012.

    Super-Trump, where ARE You?!?! You haven’t abandoned us, and Your Promises, have You!?!??!

    1. The eight years aren’t up yet – – – – – – –

  2. “it’s worth keeping in mind why fiscal responsibility matters.”

    It’s worth keeping in mind why the federal government can print money.

    1. ^this^x100000000

      I was too young to remember It well, but perhaps the closest thing to COVID-19 we’ve ever had was the oil crisis in the 1970s, where everyone was afraid we would run out, causing gas lines, lowered speed limit to 55, and year round daylight savings time, among other things. The government responded by printing money and price controls, making things worse and causing massive inflation. What will happen now is going to be 10x worse I imagine

  3. Now, it’s going to explode.

    Speaking of doomsayers…

  4. The deficit has ceased to be an argument anyone cares about. And while it is high and growing it pales in comparison to underfunded liabilities and promises from past Congresses. I don’t see anything changing under either a Trump or Biden presidency. And certainly it won’t matter to whoever controls Congress. So therefore you might as well be beating your head on a brick wall. Frankly just look at this virus panic as a good preparation and practice for the real shit to hit the fan in the future.

  5. (CBO) offered up a reminder the nation’s credit card was already close to being maxed out.

    please. zero accounting practices or culpability in Washington how are the seven people left who care about cutting spending supposed to respond to Leviathan?

  6. UBI, MMT, all the trendy prog tools are being deployed
    I’ll be in my bunker

    1. But trillion dollar deficits are the exclusive property of GOP rednecks.

      Sure, Obama inherited a $1.2 trillion deficit but it was 1/3 of that when he left office.

      1. I love that you ignore who controlled the fucking purse strings every time you shoot off you pie hole. This time with a blatant attempt to ignore 2 years of the non-budget spending that Nancy and Harry did.

        Never change you kiddy diddling subhuman trash.

  7. Syair Bali : the dollar is rising sharply.

  8. Libertarian moment!

    Some of us have been saying for years that the Cassandric howling into the wind about deficits and runaway spending and the approaching fiscal cliff is a useless attempt to warn the heedless and the best we can do is to put the pedal to the metal and hit the cliff as fast as we can, get it over quick. Burn it all down so we can get on with the rebuilding.

    When the Fed has done all it can to pump up the money supply, hid all the resulting inflation in the stock market and now has just watched several trillion dollars of QE go kablooey and they can’t lower interest rates below zero without people catching on that there’s some major fuckery going on and now the government’s just going to be handing out cash like it’s used Kleenex, well, how long is it going to take before people start treating the money like used Kleenex? I’m afraid something very bad is going on and something even worse is about to go down.

    1. I was hoping to be an old man when the shit hit the fan. Or at least living on a moon/mars colony.

    2. Taken together, those things will crater tax revenue from all angles.

      Inflation functions as a kind of tax, though.

      1. A tax on those who keep their savings in the currency, which is pretty rapidly going to be abandoned by people who have meaningful levels of savings.

  9. Huge impact on whole world because of Corona virus. Very bad conditions in financial sectors and outsourcing sectors. Many web and software developers are losing their jobs and revenue. I hope for rapid relief.

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  11. Good thing rates are so low – very cheap financing for Uncle Sam.

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  13. Who cares about crippling debt? All that matters is owning the sjw snowflake libs bro

    1. The sjw libs are shit on the debt as well.

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