The coronavirus pandemic and economic shutdown have induced Congress to spend whatever it takes to fund the health system and keep the economy afloat. Now we are starting to see just how overwhelming those costs are going to be.
My models estimate that the 2020 federal budget deficit—just the deficit—will top $4.2 trillion. To put that figure in context, last year the entire federal budget totaled $4.4 trillion, which left us with a deficit of $984 billion.
Entering 2020—and before coronavirus—the baseline budget deficit was $1 trillion. The CBO projects that federal spending from the first four coronavirus response bills will add $2.2 trillion to this year’s deficit. The remaining $1 trillion consists of the economic and technical effects of the economic shutdown—the non-legislative costs such as fewer workers paying taxes and more people signing up for unemployment and Medicaid benefits. (The CBO seems to assume a slightly lower economic and technical figure than my model, although it has not released details). Remarkably, Washington is projected to spend $49,000 per household this year—by far the largest total ever.
Economists were alarmed that the deficit—which had been growing steadily since hitting a low of $439 billion in 2015—would likely cross the $1 trillion threshold in 2020. Now, the best-case scenario—in which the economy recovers quickly with no additional legislation—shows a $4.2 trillion deficit this year, and future deficits that never again fall below $1.3 trillion. Combined with the mounting costs of Social Security and Medicare, the deficit will rise back to $2.6 trillion by 2030, and continue growing thereafter.