A couple weeks ago I casually speculated that the federal deficit could reach $4 trillion this year based on estimates from the Committee for a Responsible Federal Budget, but it now looks like the deficit will surpass $4 trillion unless literally nothing else happens this year.
The Congressional Budget Office (CBO) estimates that the deficit will be at least $3.7 trillion before factoring in anything else that happens through the rest of the fiscal year ending on October 1st.
WASHINGTON — A recession caused by the coronavirus pandemic and a burst of government spending on testing, health care and aid to businesses and households will nearly quadruple the government’s budget deficit to $3.7 trillion, the Congressional Budget Office said Friday.
The report is full of gloomy economic news, predicting a devastating hit to the economy this quarter at an annualized rate of decline of 40 percent, accompanied by a 14 percent unemployment rate.
Coronavirus-related federal debt and deficit figures are pointing to government red ink unparalleled since World War II.
The CBO's estimate includes the legislation passed by Congress to date, but it obviously doesn't include anything else that could happen this year including an aid package for cities and states that Congress is in the early stages of considering. That could add anywhere from $150 to $300 billion to the total alone. The estimate that the deficit will top out at $3.7 trillion also doesn't include whatever may happen during the upcoming hurricane and wildfire seasons.
The CBO's projection also presumes that the economy will sharply rebound in the third quarter and I don't think anyone can say that's going to happen with any certainty. The CBO projects that the economy will shrink by at least 0.5 percent for the entire year even if it does rebound in the second half of the year.
Crucially, the CBO projects that unemployment will still be 10 percent in 2021 even if the economy does recover growth in the second half of this year and that itself will come with many repercussions. It took most of a decade to recover the last time unemployment was that high as a result of the Great Recession.
All of this is to say that the hypothetical Biden administration will inherit possibly the worst financial shitshow of any administration ever courtesy of the Trump regime.
I really do feel sorry for any young activists who thought we would spend the next few years enacting large-scale social reforms that have been pushed back by at least a decade by what has occurred in the last two months alone.