Last week, the Congressional Budget Office (CBO) released its first full budget forecast since the COVID-19 pandemic upended the global economy. It’s a sobering assessment. The nation was facing a daunting fiscal challenge over the coming decades even before the crisis erupted; the surge in near-term borrowing has exacerbated the problem in dramatic fashion. The right political response is not immediate austerity but adoption of a long-term plan to align multi-generational spending commitments with achievable levels of tax collection.
According to CBO’s projection, the federal government will run a budget deficit in 2020 of $3.3 trillion, or 16 percent of GDP. The 2020 shortfall has ballooned from collapsing revenue and $2.3 trillion in emergency fiscal support. As a percentage of the national economy, the 2020 deficit is matched only by the wartime borrowing of 1943 to 1945. By next year, cumulative federal debt will exceed annual GDP; by 2030, it will reach 109 percent of GDP. Not so long ago — 2008— it was under 40 percent of GDP.
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