“This is just a recurring experience, which is you look at the numbers, and they’re bigger than you ever imagined could be possible,” said Douglas Holtz-Eakin, president of the American Action Forum and former director of the Congressional Budget Office. “And then you look at the size of the problem and you think that’s perfectly justified.”
Congress has approved nearly $3 trillion in spending in the past two months to try to arrest the economic fallout of the crisis. Because revenue is falling, Treasury is planning to issue large amounts of debt to cover these costs.
Treasury said it planned to borrow an additional $677 billion from July through September.
The large spike in debt issuance is meant to cover the cost of government assistance to individuals and businesses, the deferral of individual and business taxes until July, and an increase in the assumed end-of-June Treasury cash balance.
These figures only take into account legislation that has been passed so far this year, senior Treasury officials said Monday. An expansion in government relief, or the passage of additional legislation, could spur Treasury to increase borrowing later in the year.
“My expectation is that we will see something else,” said Michael Strain of the American Enterprise Institute. “It’s reasonably likely that the economy is going to need significant government support for many, many months … that is going to have to change as the public health situation changes and evolves.”
Interest rates are very low, making it relatively cheap for the government to borrow money. President Trump has said the government should take advantage of low interest rates to issue even more debt and expand things like infrastructure spending.
But some Republicans have already begun expressing reluctance about approving more spending, raising concerns about the roughly $25 trillion in existing government debt.
Before the pandemic hit the United States, budget forecasters had projected that the U.S. government would run a roughly $1 trillion deficit, representing the gap between spending and revenue. But the large increase in spending and the sharp decline in revenue has led forecasters to push their deficit projections to more than $3.5 trillion. The government borrows money to cover this balance by issuing debt.
There has been largely bipartisan support for the sharp increase in spending so far, with lawmakers from both parties arguing it was necessary to try to prevent a complete economic collapse. Lawmakers have approved extreme government support for businesses and households particularly for the period when many businesses were closed and Americans were encouraged to stay home, though most of the financial assistance programs were designed to last for just a short period of time.