The Congressional Budget Office (CBO) reported that our country will have a record-breaking deficit for fiscal year 2020: $3.7 trillion. In the broader context of our economy, that is the equivalent of 17.9% of GDP.
If this projection comes to fruition, this will be the fourth largest deficit since 1943 as a percentage of GDP.
According to the White House Office of Management and Budget (OMB), the deficit as a percentage of GDP was higher only in 1943 (29.6%), 1944 (22.2%), and 1945 (21%), which were of course the prime years of World War II.
From 1946 to 2019, the highest deficit as a percentage of GDP was a relatively modest 9.8%, which happened in 2009.
Not surprisingly, that deficit occurred during the first full year of the Great Recession.
The CBO now projects that unemployment will increase from 4% in the first quarter of 2020 to 14% in the second quarter of 2020. It is further projected that unemployment will continue to increase to 16% in the third quarter before dropping to a still remarkable figure of 11.7% in the fourth quarter.
All of this means that the unemployment rate during this current recession is likely to dwarf what we experienced in the Great Recession, even after the rate hopefully levels off by the end of 2020. Thankfully, unemployment is not predicted to reach Great Depression levels, though it is certainly not rare for projections to underestimate reality.
According to the Department of Labor (DOL), unemployment peaked during the Great Recession at 10% in October 2009. During the Great Depression, unemployment peaked in 1933 at a staggering 24.9%.
In contemplating these figures and projections, the key question becomes how long it will take to recover from the coronavirus recession. According to the Federal Reserve, during the Great Recession, the number of jobs in the United States peaked in December 2007 at 138.4 million.
It would not reach this level again until May 2014, over six years later.
Even before the coronavirus hit the United States, our debt and deficits were clearly at unsustainable levels. In 2019, a banner year for economic growth and employment, our budget deficit was $984 billion (4.6% of GDP).
Before COVID-19, paying for baby boomer retirements was our biggest long-term fiscal challenge. Between 2000 and 2019, the total spending on Social Security and Medicare nearly doubled, accounting for over $1.5 trillion of expenditures in 2019.
From 2000 to 2018, the number of Americans that were aged 65 and over increased from 35 million to 52 million. With an estimated 73 million Baby Boomers in the United States today, the percentage of Americans becoming senior citizens will continue to increase significantly for the foreseeable future, as will our budgets for Social Security and Medicare.
With 30 million Americans now out of work, and all of the resulting financial, health and social reverberations that such a large-scale disruption are certain to create, we are likely going to need to spend trillions of additional dollars to help stem the damage.
To state the obvious, we cannot afford such massive ballooning of our budgets from these challenges unless these are at least somewhat balanced by structural changes and significant cuts to other government spending.
The choice is not between accepting a deficit of $3.7 trillion and doing nothing. The only choice is meaningfully cutting long-term government spending in order to both help people that have been impacted by the COVID-19 crisis and to afford the critical programs that will be needed by Americans of all ages in the years to come.
Robert Zapesochny is a researcher and writer whose work focuses on foreign affairs, national security and presidential history. His work has appeared in a range of publications, including The American Spectator, the Washington Times, and The American Conservative. For several years Robert worked closely with Peter Hannaford, a senior aide to Ronald Reagan, as the primary researcher on four books and numerous columns. Robert has also worked on multiple presidential, national and statewide campaigns, including as a field office staffer for the Bush-Cheney campaign. Due to his own Russian-Jewish heritage, Robert has a keen interest in the history of U.S.-Soviet relations. In 2017 he was the co-organizer of an effort that erected commemorative statue of Ronald Reagan and Mikhail Gorbachev in Moscow. Robert graduated with a major in Political Science from the University at Buffalo, and received his Master’s in Public Administration, with a focus in healthcare, from the State University of New York College at Brockport. When he’s not writing, Robert works for a medical research company in Rochester, New York. Read Robert Zapeochny's Reports — More Here.
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