Federal deficit increase $1.8 trillion........

Economic rescue package to boost deficit by $1.8T, CBO predicts

The legislation passed last month amounts to the largest infusion of federal funds ever into the U.S. economy.

By CAITLIN EMMA

The colossal economic rescue package passed by Congress last month amid the pandemic will increase federal deficits by $1.8 trillion over a decade, although the overall bill provides more than $2 trillion in assistance, the Congressional Budget office estimated Thursday.

The independent budget agency noted that some of the aid is in form of loan guarantees, which won’t have a net effect on the federal budget. The package includes a $988 billion increase in mandatory spending and a $326 billion increase in emergency discretionary spending. It decreases revenues by $446 billion.

The most expensive chunks of the bill include about $377 billion in small business grants and loans, $293 billion in direct payments to Americans and $268 billion in expanded unemployment benefits.

The legislation amounts to the largest infusion of federal funds ever into the U.S. economy. But Congress will likely have to provide several more tranches of pandemic relief that could cost trillions of additional dollars as unemployment claims soar, businesses struggle to survive and the number of deaths continues to rise.

Congressional leaders are currently mired in disagreement over an “interim” coronavirus aid package. Republicans want to swiftly boost small business aid by $250 billion, while Democrats want to attach $250 billion in extra funding for states and hospitals, as well.

CBO cautioned that its estimate comes with a number of significant caveats. For example, exactly how federal agencies implement the bill and how the Federal Reserve sets up emergency lending facilities aren't fully known, and the effects of the virus on the labor market and the economy are "difficult to predict."

The cost of Covid-19 vaccines is still unknown, the agency added, in addition to the duration of emergency declarations nationwide sparked by the pandemic.

Meanwhile, the National Governors Association has warned that states will need at least $500 billion to bounce back from devastating budget shortfalls, and the Consumer Bankers Association has said more than $1 trillion may ultimately be needed to satisfy America’s struggling small businesses.

With the passage of three bills last month to combat the coronavirus pandemic and its economic fallout, the Committee for a Responsible Federal Budget estimated on Monday that budget deficits will total more than $3.8 trillion this year and $2.1 trillion in 2021.

Debt held by the public will exceed the size of the economy by the end of this fiscal year "and eclipse the prior record set after World War II by 2023," the fiscally minded organization projected.

But even Washington’s biggest budget hawks recognize that now’s not the time to be stingy with spending.

“This is not the moment to be constrained or concerned about the short-term deficits,” CRFB President Maya MacGuineas said in a recent interview. “This is the moment that deficits were made for and we need to respond with full force in order to deal with the health care crisis and the ensuing economic crisis.“

“It is this moment that illustrates, unfortunately perfectly, why it was so dangerous that we used the past economic expansion to increase our borrowing instead of getting our debt under control,” she said.

“Once we get past this — and who knows what time period we’re talking about because this recession could be very deep and very long — it will be critical to bring our debt back down to manageable levels for exactly the reason that this is demonstrating. You want to have the fiscal health of your country strong so that when you have emergencies, you’re in the best position possible to respond to them.“

The massive pandemic relief packaged cleared by Congress last month followed passage of an $8.3 billion emergency measure to pad agency budgets and federal response efforts, and a $192 billion bill that provides several weeks of paid sick and family leave for some Americans affected by the disease.