U.S. Debt to Surge Past Wartime Record, Deficit to Quadruple

[mahatmakanejeeves]

Source: Bloomberg News

U.S. Debt to Surge Past Wartime Record, Deficit to Quadruple

By Christopher Condon and Dave Merrill

April 21, 2020, 5:00 AM

The U.S. budget deficit may quadruple this year to almost $4 trillion. Projections from the Committee for a Responsible Federal Budget (CRFB) say that by 2023 U.S. debt held by the public will surpass records set in the post-World War II years. (1)

And these projections only include spending enacted so far—in a three-month-old crisis that has seen emergency Congressional appropriations top $2.3 trillion. Additional spending is almost certain as the coronavirus pandemic destroys millions of jobs and thousands of businesses while slashing tax revenues for local and state governments.

Even before the crisis, U.S. debt-to-GDP had more than doubled to 79% in 2019 from 35% in 2007. Deficit hawks, already hard to find, disappeared once the virus shut down whole swaths of the U.S. economy. The Coronavirus Aid, Relief, and Economic Security (CARES Act) legislation passed on a unanimous voice vote. Lawmakers understood that frugality made no sense in the face of impending economic collapse.

{snip}

(1) http://www.crfb.org/blogs/new-projections-debt-will-exceed-size-economy-year

Read more: https://www.bloomberg.com/graphics/2020-debt-and-deficit-projections-hit-records/

---

Hat tip, Joe.My.God:

https://www.joemygod.com/2020/04/federal-budget-deficit-likely-to-quadruple-to-4-trillion/

[jimfields33]

1. And more to come

Congress has at least two more bills coming in the future. One this week and not discussed but I think at least one more.

[keithbvadu2]

2. The Tea Party does not seem to mind republican deficits.

The Tea Party does not seem to mind republican deficits.

[exboyfil]

6. They still blame Obama for Bush's 2009 budget

Difference this time is you have almost a full year since the start of economic impact of this crisis until the next President assumes office (or shudder Trump starts his second term).

[progree]

24. If someone tries to blame Obama for the FY 2009 $1.4 Trillion deficit:

Some righties telling you that Obama doubled the last Bush deficit, from less than 500 B$ to more than a trillion dollars?

They are trying to make you think that the last Bush year was Fiscal Year 2008. Actually, the last Bush budget (FY 2009) contained a projected deficit of $1.2 Trillion. Fiscal Year 2009 covers 10/1/08 - 9/30/09 -- the last 3 2/3 months of the Bush Administration plus the first 8 1/3 months of the Obama administration. The budget for FY 2009 was signed into law by Bush. It contained a projected $1.2 trillion deficit according to FactCheck.org:

Shortly before Obama assumed office, the nonpartisan Congressional Budget Office {on January 7, 2009} projected that the deficit for fiscal year 2009 would be $1.2 trillion ( http://cbo.gov/ftpdocs/99xx/doc9957/MainText.3.1.shtml ). {Bush left office and Obama assumed office on January 20, 2009 at noon}.

The fiscal year ended on Sept. 30, 2009, with the deficit at $1.4 trillion. But only some of that was Obama’s doing. We conducted an exhaustive study of the spending bills Obama signed for that year, and concluded that Obama can be fairly assigned responsibility for a maximum of $203 billion in additional spending for fiscal 2009. Others put the amount lower: Economist Daniel J. Mitchell of the libertarian CATO Institute — who once served on the Republican staff of the Senate Finance Committee — has put the figure at $140 billion.

More: http://factcheck.org/2012/09/romney-obama-court-moms-distort-facts/

[sakabatou]

3. It's going to be a long haul to clean Trump's mess

[AlexSFCA]

4. they will pump 2-3 T more before election

to get stock market back up again.

[IronLionZion]

5. What we need now are some big tax cuts for our job creators

that will create lots of jobs. Then cut funding for benefits and public services like CDC, WHO, NIH, Medicaid/Medicare etc. That will help the budget.

There was a time when GOP complained loudly every day about the debt. But a black Democrat was president spending stimulus money to put Americans back to work and get health insurance after a Republican recession. There is something consistently consistent about Republicans and recessions.

[sop]

7. Don't worry, the budget hawks who are so hard to find at the moment will be back next year.

After they've plundered the treasury to bail out their biggest donors, they'll come after our entitlements to pay for it.

[CrispyQ]

22. Never let a good disaster go to waste.

Shock doctrine before our very eyes.

[pampango]

30. Indeed. FDR used a disaster to transform society for the better. Trump and the GOP

have other plans. Bankrupt the economy to benefit the rich and powerful then transform into deficit hawks when a Democrat tries to clean up their mess.

[packman]

8. Gawd damn, he did it - he really did it

Bankrupted (or coming close to it) the entire country. He can put the American economy up on the shelf with his bankrupt - pick one - vodka, steak, university , helicopter, casinos, etc., etc.

[sop]

14. We must have t-shirts, bumper stickers, yard signs and even face masks emblazoned with

"Everything Trump touches dies." Nothing else needs to be said about Trump.

[Drahthaardogs]

9. It's OVER!

I don't see how they fix this.

[Igel]

11. It'll be interesting.

Not a good word in this case, "interesting."

Some were calling for another $2 trillion almost at once.

I'd like to see what happens to the $1.8 trillion already allocated before I chucked a lot more money at the problem just to be able to say how much money I'd chucked.

Might save the patient's life but make him homeless and destitute so he starves a month later.

[Yavin4]

10. In a time of crisis, the worst thing to do is focus on austerity.

Austerity in a time of crisis brings out the authoritarians.

[progree]

12. Important to emphasize these aren't in just dollar terms or even in inflation-adjusted

dollar terms (both which far exceed WWII peak levels), but also relative to the size of the economy.

From the OP linked article:

Due to the effects of the crisis and legislation enacted to combat it, debt and deficits will now grow much higher, to never-before-seen levels both in dollars and as a share of Gross Domestic Product (GDP)

... During the Great Recession, debt grew by 21 percent of GDP between the end of 2008 and the end of 2010. Under current law, we estimate debt will grow a similar amount over just a seven month period. Specifically, we estimate debt will grow from just under 80 percent of GDP prior to the crisis to over 100 percent of GDP by the end of Fiscal Year 2020, on October 1. Our projections show debt will continue to grow as a share of GDP thereafter, exceeding the prior record of 106 percent set just after World War II by 2023 and exceeding 107 percent of GDP by 2025. The estimates assume a robust recovery in 2021 and a full recovery to pre-crisis projections by 2025.

Some "progressives", like Thom Hartmann, say, so what, we had these levels after WWII and we brought them way down in a couple decades, so what's the big whoop anyway? (He's said that innumerable times).

What they leave out is that for many years after WWII, the U.S. had the world's only sizable modern unbombed-out manufacturing capacity -- in other words, we had a near monopoly on manufacturing consumer products.

It ain't that way now.

Next, some "progressives" say, so what? The national debt is just a number. BFD.

What they don't understand is that interest on the federal debt gets first dibs on tax revenue coming in. A projection by the Congressional Budget Office 3 years ago (well before the Trump TCJA tax cut for the wealthy, and of course well before COVID-19), was that by 2027, interest on the federal debt would exceed defense spending. And in a couple decades exceed spending on Social Security benefits. Anyway, these are funds that could be going to programs but instead go to bondholders.

Some "progressives" will say, yeah, but so what? It's just interest we are paying ourselves.

Well, yeah, depends on how you define "ourselves", since the vast majority of Treasury bond interest goes to the wealthy. And about 30% to foreign investors.

[Auggie]

13. IMO TrumpCo will use this in efforts to privatize Social Security ...

cut welfare, food stamps, etc.

[Bayard]

16. That will lose him the election for sure

Biden will have to take back all the wealthy tax cuts tRump handed out like candy, even while they moan he's raising taxes. Then actually raise their taxes at least 1 or 2% like Warren talked about. I remember when I was a kid, they were taxed at, what--25%+?

Then make corporations pay their fair share. And un-subsidizing the oil industry.

That will go a ways toward paying down the debt.

[QED]

17. I'd like to see Biden etc. talk about "how we pay for this"

And just go for it....

The choice:

IQ45: more tax cuts for billionaires and corporations? Explain what happened last time - corps used the money to buy back their own stock, it didn't trickle down to pay raises for employees.

Decimated social programs and Social Security (not an entitlement!), medicare & medicaid


OR

Biden: Protect social programs, etc.
Reverse the tax cuts

[Bengus81]

15. Trump wants to bail out his Oil buddies who have received breaks for 100 years.....

There goes billions. How about tell them to use the massive PROFITS the made off us when Oil was $150 a barrel? If they pissed it off on mansions and Gulfstreams then too fucking bad.

[ffr]

18. tRump's cratering economy is already piling up red tape. We're on the hook for $24.5T

at the moment, with probably $10 - 20T to get us out of it, when we finally have the benefit of electing responsible adult democrats into power.

President Thumb Up His Ass and his thumbs up their asses supporters and elected henchmen really fucked us this time!

[Politicub]

19. And we get $1,200 for the privilege of seeing the deficient balloon. This is insane.

A wealth tax needs to be put into place immediately. That will be just a drop in the bucket of what's needed for the revenue shortfall, but you have to start somewhere.

[PSPS]

20. They forgot "and taxes on the rich now the lowest in 90 years."

[area51]

21. +1 n/t

[hueymahl]

23. Inflation is the only way out now

With this level of debt, and the upcoming demands on our social support structure for retiring baby boomers, it is essentially impossible to pay off the debt without significant inflation.

Mark my words, 10% annual inflation is coming. At that rate, todays debt will be worth 25% of what it is now in 10 years. That level we can pay off.

[progree]

25. Unfortunately, interest on the debt will rise with inflation, so the existing federal debt will

compound just as fast as inflation. Not to mention spending will also rise with inflation.

The average maturity of federal debt is only about 5.4 years, last time I checked in Septemeber 2019, so as interest rates go up, interest on the federal debt will rise without much lag.

[roamer65]

28. Not with the manipulation of inflation data.

They have been changing the measurement since 1980 and will do it even more.

[progree]

29. I don't think they can manipulate to the extent required so that it effectively wipes out the

Last edited Wed Apr 22, 2020, 05:36 AM - Edit history (3)

debt (or reduces it to 25% of what it is now) and everything is fine. And the market is what determines intermediate and long term interest rates, and it isn't fooled by official figures. It's supply and demand and what other alternatives are offering in the way of return that determines interest rates.

That we can just inflate ourselves out of the national debt problem is probably the oldest nostrum in fiscal and budgetary history, as is its debunking. There has been a loud chorus of politicians and economists squawking about how the national debt is an unsustainable crisis for generations, and yet, this solution has never occurred to anyone before now?

If manipulating the inflation statistics is the solution, and if they've been manipulating the inflation statistics since 1980, then why does the national debt as percent of GDP keep climbing? Because they haven't been manipulating them enough?

[tclambert]

26. So we got this stimulus package in a big rush, and no asked, "How you gonna pay for that?"

But Medicare-for-all, which SAVES money, always provokes that question, and College education for all, and job creation programs.

[Wolf Frankula]

27. It's a Republican Deficit. It doesn't matter

Just ask Dick (Elmer Fudd) Cheney and Alan (The Paranoid Randroid) Greenspan.

Wolf