Federal stimulus spending during the COVID-19 pandemic has helped stabilize the economy, but that the spending will come at a significant cost in the long run, according to projections from the Committee for a Responsible Federal Budget.
The nonpartisan CRFB projects the national deficit will rise to 131% of U.S. gross domestic product by the end of the decade. That estimate assumes $1 trillion in additional economic relief amid the COVID-19 pandemic, as well as further tax cuts and spending. The Congressional Budget Office recently projected U.S. debt will exceed the size of its entire economy this year, and the CRFB projects debt will be 118% of GDP by 2030.
The CBO already projects the national deficit to quadruple between 2019 and 2020, from less than $1 trillion to about $3.7 trillion.
“It’s just massive,” Marc Goldwein, the CRFB’s senior policy director, said on a webinar Monday.
The CBO’s estimate, however, assumes the federal government does not pass any more legislation to blunt the economic impact of COVID-19.
“But likely and—hopefully, in some ways—we are going to pass some legislation to help support the economy,” Goldwein said.
Given and other factors, the CRFB projects this year’s deficit will reach $3.9 trillion.
The rising deficit has major implications for trust funds such as the Medicare hospital insurance trust fund, which the CRFB projects will run out by 2023. That’s the same year a senior Trump administration official projected the Medicare Hospital Insurance Trust Fund, which pays for Part A, would run out in a high-cost environment, such as during a pandemic.
The official projection from the trustees in charge of monitoring Medicare’s solvency is that the fund will run out in 2026, although that projection does not consider the effects of the COVID-19 crisis.
Even so, Goldwein said he thinks the borrowing the government is doing today is justified.
“The borrowing we’re doing now is incredibly important for spreading the pain of the current pandemic and the current economic crisis over time and for providing an additional boost to the economy when output is low,” he said.