Even after the coronavirus pandemic is behind it the federal government will run massive deficits for the next decade, the Congressional Budget Office said Thursday, underscoring the deep fiscal hole facing President Biden even before his new round of COVID-19 spending.
Without that new spending, Uncle Sam is projected to run a $2.3 trillion deficit this year, the second-largest in history, only training 2020’s $3.1 trillion gap.
If left on a glide path, the economy as measured by gross domestic product will rebound to its pre-pandemic level by the middle of this year, though the jobs picture will continue to lag, only reaching pre-pandemic levels of employment in 2024.
Mr. Biden is pushing for nearly $2 trillion in additional spending to try to speed that recovery.
His plans weren’t part of the CBO’s analysis, which incorporated laws enacted through Jan. 12, or before the new administration took over. Instead, the CBO’s new report is a baseline, signaling where things are going before any new legislative action.
Mr. Biden has signaled that he won’t let deficits derail him, and he chided Republicans last week for suggesting a smaller relief bill because of concerns over red ink.
“All of a sudden many of them have rediscovered fiscal restraint and the concern for the deficits,” he said. “But don’t kid yourself, this approach will come with a cost: more pain for more people for longer than it has to be.”
His advisors have said they fear a repeat of 2009 and 2010, when they believe the Recovery Act approved after the Wall Street collapse wasn’t robust enough, leaving the country mired in a prolonged recovery that dogged President Obama for most of his tenure.
In this case, the CBO is already predicting a speedy recovery and says it will help drive deficits below the $1 trillion mark in 2020.
The annual deficit will remain below that line for a few years, before surging above $1 trillion again in 2025, and soaring upward from there, CBO predicts. By 2031, the deficit will be nearing $2 trillion, and on an upward trajectory.
That’s because the fiscal picture, by then largely free of coronavirus effects safe for lingering interest costs, will again be driven by a persistent imbalance between taxes collected and spending promises already made.
The grim picture will be driven largely by Medicare, where nominal spending is projected to double over the next decade, and by Social Security, where spending will nearly double, and where the program will soon become a net drain on the broader budget.
Social Security’s trust funds and the Postal Service contributed a $10 billion surplus to the government in 2020, but this year they will be a $39 billion drain, and by the end of the decade will sap $385 billion in 2030, CBO says.
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