A new government report projecting a record $3.3 trillion deficit this year may make it harder for Republican budget hawks to agree to another COVID-19 relief package.
Wednesday’s report from the nonpartisan Congressional Budget Office (CBO) painted a gloomy outlook by projecting that the deficit for fiscal 2020 will more than double the previous high — $1.4 trillion in 2009 during the height of the Great Recession.
This year’s deficit will also account for 16 percent of gross domestic product (GDP), the highest since 1945. Overall debt is on track to surpass 100 percent of GDP next year, and break its World War II record by 2023, according to the CBO.
The report factors in $3.6 trillion in spending that Congress approved in four rounds of COVID-19 emergency relief, raising concerns among conservative lawmakers that the cost of the coronavirus package under negotiation could lead to more harm than good.
Sen. Ted Cruz (R-Texas) is among the fiscal hawks who argue that additional relief measures won’t help.
“Sen. Cruz believes existing proposals in Congress will add even more to the debt without taking meaningful steps to spur economic growth and get Americans safely back to work, which will have devastating consequences for future generations,” Cruz spokesperson Maria Jeffrey said.
On the other side of the Capitol, Republican leaders aren’t firmly opposed to another relief measure, but they’re harshly critical of the one put forth by Speaker Nancy Pelosi (D-Calif.) and Democrats in May.
“Additional COVID measures must be tailored to meet the remaining needs, and not just a wasteful free-for-all,” said House GOP Leader Kevin McCarthy (R-Calif.).
“Unlike Speaker Pelosi, the American people know we can’t throw around a trillion dollars here and a trillion dollars there,” he said.
House Democrats passed a $3.4 trillion relief measure in May, while Republican negotiators opened their bid closer to $1 trillion.
Senate Majority Leader Mitch McConnell (R-Ky.) said in late July that as many as 20 of the 53 GOP senators would likely vote against any new coronavirus relief bill, in part because of the price tag.
Still, McConnell is working to advance a “skinny,” $500 billion relief bill through the Senate to lay down a marker for negotiations and help give cover to vulnerable members of his party up for reelection. A vote on that measure could come as early as next week, posing a test for what level of support Senate Republicans can muster in their own party for a bill that’s less than half their initial offer.
Those efforts are taking place separate from stalled negotiations between Pelosi and Senate Minority Leader Charles Schumer (D-N.Y.) on one side and Treasury Secretary Steven Mnuchin and White House chief of staff Mark Meadows on the other.
Meadows, in particular, has put the fiscal issue front and center. As a congressman and co-founder of the conservative Freedom Caucus, Meadows frequently railed against bipartisan spending deals because of the hit to the deficit.
Mnuchin, meanwhile, has struck a slightly more optimistic tone, saying in congressional testimony Tuesday that President Trump agreed that some level of fiscal aid was still necessary.
“Let me say I very much agree with you and those other experts that more fiscal response is needed. The president and I want to move forward with more fiscal response,” he said.
While Democrats have come down from $3.4 trillion to $2.2 trillion and Republicans have come up to $1.3 trillion, they remain bitterly divided over hundreds of billions of dollars in proposed aid to state and local government.
Fiscal experts, including Federal Reserve Chairman Jerome Powell, say bold stimulus measures are needed to help the country dig its way out of the deepest economic downturn since the Great Depression, though many have not put a price tag on those efforts.
Longtime advocates for fiscal restraint argue that even with the new CBO report, debt concerns should not stand in the way of a strong response to the pandemic.
“The warning bells this report contains should not cause a premature end to borrowing, but a commitment to dealing with the debt at the appropriate time,” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget.
“Any additional borrowing must be for needs related to the pandemic, not political pet projects, and we must target those dollars to where they provide the best return on our economic and health care outcomes,” she said.
Shai Akabas, director of economic policy at the Bipartisan Policy Center, added that borrowing now could help lead to a stronger recovery, and ultimately put the country in a better position to address the debt.
“The strange reality is that for the nation’s long-term budget picture to get better, it must get even worse in the short term,” he said. “Doing so will give our economy the best shot to bounce back, and a good recovery now will help lessen budget shortfalls in coming years.”