As the coronavirus continues to ravage the nation and the economy, the government has been forced to support both business and workers with massive relief bills. Through multi-trillion dollar stimulus packages and massive industry bailouts, Congress has gone into the equivalent of war time spending. This has led to the US government debt exceeding the national GDP in the 2021 fiscal year, something that has not happened since WWII. The ratio of debt to GDP has exceeded 100% in quarters, though it has not exceeded it for a full fiscal year in almost 70 years.
After WWII debt levels remained fairly stable and the debt to GDP level dropped to around 50%. However, economists today do not see this trend happening. The deficit was expected to continue growing over the next decade as much of the population aged and Social Security and Medicare remained in place, though the pace it is at now is unsustainable. The US is projected to be the only advanced economy to have a rising debt to GDP ratio after 2021. The issue with this comes with interest rates, and the sensitivity the debt will have to even small shifts in rates.
Deficit spending in a time of crisis is necessary and inevitable to stabilize the economy and support citizens. It is after these crisis' are solved when things must be done to rebalance the budget and the economy. In the coming years the US will be forced into tough realizations over what to do with its debt problem.
2 comments:
This is a very interesting topic to bring up, and something to think about as well is that this pandemic, in the U.S, isn't going to be over anytime soon. This leads to the question... how much additional relief can the government afford to provide to businesses and households affected by this pandemic? Moreover, with the presidential election approaching, it will be interesting to see how either political party plans to approach this issue. Cutting the nation's debt hasn't been a priority of lawmakers in recent years. However, after recent stimulus packages and industry bail outs, lawmakers' willingness to spend is certainly going to be tested.
I believe that no matter the consequence of the stimulus bill, it was (and is) 100 percent necessary. Without it our economy would be in a lot worse shape. As well, the country's current debt can be paid off later when the economy is doing better.
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