The soaring deficit reflects the huge spending increases approved by Congress in response to the economic downturn caused by the coronavirus outbreak. Most economists say the spending was necessary to stabilize an economy rocked by double-digit unemployment and a severe contraction in economic growth.
Those efforts are exacerbating America’s fiscal imbalance. The nonpartisan Congressional Budget Office has estimated that the federal deficit will hit $3.7 trillion by the end of this fiscal year. The Committee for a Responsible Federal Budget pegged the number at $3.8 trillion.
“If policymakers had spent the past five years addressing the debt rather than passing massive tax cuts and spending hikes, we could have offered more economic support and still had lower deficits,” said Marc Goldwein, senior vice president at the Committee for a Responsible Federal Budget, which supports lower deficit spending.
In April, the monthly budget deficit rose to a record $738 billion, due to both a large drop in tax revenue and a surge in federal spending. The monthly deficit for May came in at about $400 billion, a substantial decrease from April but still far beyond normal levels. These estimates do not include the impact of the federal government’s approximately $600 billion rescue effort for small businesses, Treasury officials said. That funding is classified as a loan rather than an expenditure, but most of the loans are expected to be forgiven, meaning the real deficit number is likely higher.
The deficit increase includes about $300 billion in spending on the $1,200 stimulus checks allocated to more than 100 million Americans. It also reflects hundreds of billions of dollars spent to dramatically increase unemployment benefits, as well as hundreds of billions in aid for hospitals, states and cities, and other federal relief efforts.
Senior White House officials have expressed concern about the growing price-tag of the relief efforts, but President Trump said last week that the administration will support a fourth coronavirus recovery package. Many economists say Congress should focus on saving the American economy now, and worry about the impact on the deficit later.
“They would have thought you were pretty crazy if you were yelling about the deficit in 1943. It’s a comparable situation now,” said Dean Baker, co-director of the Center for Economic and Policy Research, a left-leaning group. “You have to spend enough to keep people more or less whole. There is not much of an issue here.”