It is no shock that the federal budget deficit is on track to skyrocket due to the economic damage the coronavirus pandemic and the ensuing lockdowns have caused. While the media is immediately jumping to the “it’s all Trump’s fault” conclusion, we are going to examine this new report fairly.
On Wednesday, the CBO (Congressional Budget Office) revealed a budget outlook update projecting the federal deficit will add up to $3.3 trillion dollars for the current fiscal year.
According to the report, this is more than triple the shortfall recorded for 2019 and is the “result of the economic disruption caused by the 2020 coronavirus pandemic and the enactment of legislation in response.”
If it reaches the projected $3.3 trillion mark, the budget deficit will amount to 16% of our total GDP, making it the largest since 1945. Based on this forecast, the CBO projects 2021’s numbers will see a vast improvement at about half that at 8.6% of our total GDP.
While the 2020 forecast might seem grave to our economic recovery, it is a significant improvement from previous estimates, which projected it to be half a trillion higher at $3.8 trillion. But as we know, the “experts” are almost always wrong.
The CBO added that, as a result of the high national deficit, the national debt is expected to rise to 98% of our total GDP in 2020, which is nearly 20% higher than that of 2019. However, it is significant to note that in 2021, our national debt is projected to exceed 100% of our GDP. This would mark our highest national debt since what was incurred during World War II.
Of course, the largest contributor to the 2020 federal deficit, and in turn, the national debt, is the multi-trillion-dollar coronavirus relief packages.
The good news is that a significant portion of the stimulus packages were loan-based. At least $1 trillion, if not more, was allocated toward small business, student, and corporate loans. This means that, while the $3 trillion deficit sounds bad at face value, a large portion of it will be repaid over time.
However, a wild card factor in the speed at which we repay the addition to the national debt and recover from the federal deficit is how strongly the economy bounces back.
If President Trump continues to push hard for a full reopening by the end of 2020, we could be in great shape for beating the CBO’s projection. Even more promising, we have an exceptional chance at recovering our losses, especially if the president is re-elected in November, simply because we know he indeed does have the “magic wand” when it comes to the economy.
But, if there’s one thing we know, it’s that if Joe Biden is elected, we may never recover. Biden has openly vowed to impose a national lockdown all over again if he wins the presidency, essentially giving our economy the death sentence.
While the CBO’s projection sounds alarming when you’re talking about trillions of dollars added to the public debt, the future of it depends on who is elected president in November. With one candidate who wants to reopen the country and one who wants to perpetually keep it shut down, the choice couldn’t be clearer.