As recession-related demands continue to augment federal spending, the Congressional Budget Office (CBO) forecasted a larger-than-the-economy US federal budget deficit in 2021.
The U.S. federal debt is now at an alarming state after it reached an all-time high deficit since World War II as the country tries to temper the pandemic’s economic impact. It is, however, expected to grow to unprecedented size as coronavirus continues to cripple the U.S. economy.
Pandemic prompts federal debt to soar
The outlook, which was posted by the Congressional Budget Office on Wednesday, September 2, shows that U.S. federal debt is set to grow as much as 98% of the country’s gross domestic product by the end of 2020.
Per the data, the country’s federal budget deficit is expected to reach 16% of the country’s gross domestic product this year, which is equivalent to $3.3 trillion. The deficit is three times larger from last year’s 4.9% and is also at its highest levels since World War II.
Yet, alarmingly, the office also projected the U.S. federal debt held by the public to exceed the size of the U.S. economy next year as well.
For its fiscal year ending September 2021, federal debt would amount to 21.9 trillion or is equivalent to 104.4% of the nation’s GDP. Debt is expected to soar to $33.5 trillion or 109% of the US GDP in 2030 as well.
On the flip side, this year’s deficit is smaller compared to CBO’s preliminary expectations of $3.7 trillion.
Divided experts’ sentiment
Experts and policymakers, on the other hand, expressed varying opinions concerning the matter. Some say it is better to ramp up federal spending to thwart off the economic impact of the pandemic, while some argue that the country’s debt is unsustainable.
A senior fellow at Manhattan Institute, for instance, said that it is better to spend more to keep the U.S economy afloat.
“In the short term, you have to spend what it takes to minimize the recession and keep the economy afloat,” Brian Riedl told The Wall Street Journal. Yet he also admitted that the “federal debt to GDP ratio is totally unsustainable.” And that is despite low-interest rates.
An economic-policy expert echoed a similar concern as well.
Employ America’s Elizabeth Pancotti told The Washington Post that Congress should prioritize “swaths of families unable to pay rent or put food on the table” instead of the federal budget deficit.
“The numbers I’m more concerned about are the swaths of families unable to pay rent or put food on the table, and Congress should be working to decrease those instead of the deficit,” she said.