This week’s vote on Capitol Hill to raise the debt ceiling by $2.5 trillion reflects the aggressive spending that lawmakers undertook over the past two years to try to address the societal and economic fallout caused by the coronavirus pandemic.
Over the past decade U.S. federal debt has steadily ticked upward tracking with the country’s economic growth. It accelerated once the pandemic took hold.
Since February 2020, lawmakers have passed nine legislative packages that authorized at least $5.7 trillion in new money, according to the Committee for a Responsible Federal Budget. All but one of the measures cleared Congress with bipartisan support, as Democrats and Republicans put aside their differences to respond to the worst economic crisis since the Great Depression.
Federal spending has ballooned in that time, with outlays higher each month than the same month pre-pandemic.
Federal spending peaked early in the pandemic and again in March 2021 after the passage of the American Rescue Plan Act.
Three rounds of stimulus payments added more than $800 billion to the national debt.
Federally-sponsored boosts to unemployment compensation, including coverage for gig workers, extra money each week and extended eligibility, became less generous as the pandemic went on, before ending at the start of September.
The largest increase in pandemic spending came from the Small Business Administration, especially the Paycheck Protection Program.
The federal government spent just under $400 billion in aid to state, local, tribal and territorial governments.
The Child Tax Credit expanded by the American Rescue Plan Act began sending monthly payments to most families with children in July.
In shoring up businesses, and trying to make families financially whole, lawmakers laid to rest their normal concerns about deficit spending. They opted against offsetting any of their bills with higher taxes or cuts elsewhere, spending further into the red in a country that historically has shelled out more than it takes in annually in revenue.
Revenue fell in 2020 due to the pandemic’s economic fallout, and has been dampened for years following President Donald Trump’s 2017 Tax Cuts and Jobs Act.
The sum total of Congress’s coronavirus relief efforts — which resulted in spending so far that is more than the entire federal budget in the 2019 fiscal year — helped bring back an economy on the brink by reversing rampant unemployment and delivering much-needed help, including vaccines.
“I think the lesson learned from the Great Recession is that if you don’t go big with aid, you risk not going at all,” said Daniel Zhao, senior economist at the job site Glassdoor. “The fact that we had such enormous support during this recovery has facilitated a very dramatic recovery in the labor market.”
Yet the bill for those spending packages is essentially now coming due, setting the stage for what had been a vicious political fight. Republicans for months had refused to help Democrats lift the country’s borrowing cap, even though GOP lawmakers backed some of the past spending that contributed to the debt. Republicans withheld their support out of a belief that doing so would further help President Biden spend more, as he seeks to advance a new, roughly $2 trillion social spending package. Democrats say that measure is financed in full.
Ultimately, the two sides worked out a deal, setting up a fast-track process that will allow Democrats in the narrowly divided Senate to raise the limit without requiring support from the GOP. The debt ceiling increase could sustain federal borrowing until after the 2022 midterm elections, postponing yet another high-stakes political feud over the country’s fiscal health until late next year or into early 2023.