The CBO Vivifies the Costly Nature of the Covid-19 Response
The Congressional Budget Office (CBO), the federal, nonpartisan budgetary scorekeeper, recently released its updated budget outlook, and it paints a dreary picture of the country’s fiscal state in the aftermath of the pandemic. While this doesn’t necessarily mean the unprecedented levels of spending in response to the coronavirus crisis were wrong, it does recommend caution when deciding whether to enact more emergency measures.
In order to combat a rampant pandemic and the economic shutdowns it brought about, Congress embarked upon a spending spree that may not yet be finished. While policy analysts had already been concerned about the trillion-dollar deficit the country was projected to have to handle this year, a mere trillion-dollar deficit sounds rather nice right now.
With the dust beginning to settle, the CBO now projects a staggering $3.3 trillion deficit for the 2020 fiscal year. And while 2021’s deficit is now projected to be just over half that amount, that still means a $1.8 trillion deficit, a number that would have far surpassed previous records on its own.
At this rate, debt held by the public will exceed 100 percent of national gross domestic product (GDP) by next year. As recently as January, the CBO was projecting that this would not happen until 2031. The annual deficit had amounted to $7,894 per American household back in January, now it’s $25,751 per household.
And perhaps the most concerning element of this data is that the long-term concerns about the sustainability of entitlement programs are now very much short-term problems. Even prior to the pandemic, Social Security and Medicare were projected to run an $82 trillion deficit through 2048. But now the risk of depleting their trust funds is imminent, with the Medicare Hospital Insurance trust fund risking insolvency by the time of the next presidential election in 2024.
None of that sounds very rosy, and it certainly isn’t. But with that context in mind, Congress’s recent reluctance to enact additional spending measures makes more sense.
When the Senate released its Phase Three proposal, what became the Coronavirus Aid, Relief, and Economic Security (CARES) Act, House Speaker Nancy Pelosi countered with a proposal of her own that would have included more than $430 billion in unrelated projects, including a multiemployer pension plan bailout, a postal service bailout, and $635 million for the National Endowment for the Arts, the National Endowment for the Humanities, and the Kennedy Center.
Few of these proposals made their way into the final CARES Act, but that hasn’t stopped the House from throwing vast amounts of money at the wall and seeing what sticks. As the Senate considers Phase Four legislation that would likely come with a price tag between $500 billion and $1 trillion, the House has already passed legislation that would increase spending by $3.5 trillion.
Concerns about debt have often been dismissed as out-of-touch given the scope of the pandemic, but the reality is that Uncle Sam is in a very bad financial situation. Any cans that get kicked down the road now need to be picked up by future generations.
The coronavirus pandemic and its economic consequences are a once-in-a-century crisis that have resulted in unprecedented levels of spending. But that doesn’t mean that Congress shouldn’t be trying to limit that spending wherever possible.
