DEBT RECKONING
IT’S A DIFFICULT time to be a deficit hawk. In March, Congress passed the CARES Act, named to show what lawmakers on both sides of the aisle wanted to be seen to be doing in the wake of the economic devastation caused by the outbreak of COVID-19. They cared to the tune of about $2.2 trillion, all of it billed to the deficit, making it the single biggest legislative care package in history by a wide margin. It was the first time Congress had ever passed a bill with a trillion-dollar price tag. As a point of comparison, the Affordable Care Act, the 2010 health law that would be known as Obamacare, which was viewed as unusually costly, had to be whittled down during the legislative process so as not to technically exceed the trillion-dollar mark. Its 10-year price tag, at the time of passage, came in around $940 billion.
But any real worries about those sky-high figures appear to have melted away in the face of the pandemic, which has exposed the underlying unseriousness of Washington’s approach to budgeting. For nearly 40 years, federal lawmakers have been trying, or at least pretending to try, to reduce the deficit. But when asked to make tough budgetary choices, they consistently buckle under the pressure of partisan politics. This, in turn, has given rise to simplistic economic theories designed to justify whatever outcomes are most convenient.
The CARES Act followed a series of smaller relief bills and would be succeeded by a $310 billion top-up to the original bill’s small business loan program, bringing Congress’ total coronavirus relief spending to nearly $3 trillion. And that was just for starters. By summer’s end, House Democrats and Senate Republicans were haggling over a new round of stimulus, with Democrats pushing a $3 trillion aid package and Republicans, representing the limited-government side of the argument, backing a mere $1 trillion in additional deficit spending.
When their bickering went as congressional bickering often does—nowhere—President Donald Trump eventually stepped in to impose extensions via executive fiat of some of the original CARES Act programs, including a boost to unemployment insurance that would cost tens of billions more. Did it matter that Trump’s unilateral move raised questions about his constitutional authority to authorize such spending? Not really. There was money to spend, or maybe, given the state of the federal fisc, there wasn’t, but either way, some politician, somewhere, somehow, was going to find a way to spend it. Trump even argued that his orders were designed to prod recalcitrant lawmakers into making a deal, which is to say, a deal to spend more.
Even before the virus wreaked havoc on the economy, projections showed that America’s 2020 budget deficit—the gap between federal tax revenues and total spending—would surpass $1 trillion for the first time in nearly a decade, and would continue to do so for years to come. The Medicare and Social Security trust funds, meanwhile, faced insolvency.
In 2016, Trump had campaigned on eliminating the national debt in under a decade. Yet by June 2020, the federal budget deficit had reached $864 billion…for just the month. That was more than the entire budget gaps in either 2017 or 2018. By September, the nonpartisan Congressional Budget Office (CBO) was projecting a $3.3 trillion annual deficit in 2020. Federal debt levels, which equaled just 35 percent of the economy in 2007 and 79 percent of the economy in 2019, would reach 98 percent. The CBO had previously warned that persistently high debt and deficits would have consequences: slower economic growth, an ever-increasing share of the budget consumed by interest payments on the debt, and reduced capacity to act should a major crisis arise.
And yet as the virus consumed the nation, even many deficit hawks were recommending more spending, at least in the short term. In April, the Committee for a Responsible Federal Budget (CRFB), perhaps the foremost organization devoted to advocating lower federal deficits, issued a statement saying “today’s high deficits are needed to combat the current crisis” while also warning “they are by no means free.”
“It is strange to be a deficit hawk advocating for higher deficits,” CRFB Senior Vice President Marc Goldwein says,
