The US budget deficit has been sharply increasing over the years riding on public debt. Now, Covid-19 is well set to push the total debt accumulated over the past decades beyond the entire size of the world's biggest economy–for the first time since World War Two.
To defeat Nazi Germany and imperial Japan, the White House had to lend record amounts and the federal debt was 106% of GDP in 1946. However, the US could even have broken that record in 2013 as the pace of borrowing intended to funnel cash into struggling businesses and households was not slowing down, reports the Associated Press.
Breaking it down, the annual deficit is $3.3 trillion in the present fiscal year ending on September 30. The annual figure is already a record–16 percent of total GDP–the first in 75 years, according to the Congressional Budget Office.
With no room for more taxpayers' money, the government is bound to keep lending through bond issuance and if the debt accrued from previous years is added to the amount borrowed this year, total debt would be more than 100%. By 2023, it is predicted to reach $24.5 trillion or 107% of GDP.
The US government was already deeply in debt even before the virus struck in March, reports the Associated Press. The budget had absorbed the expenses of the 2007-2009 Great Recession, the federal benefits for the retirements of the vast baby boom generation and the cost of President Donald Trump's 2017 tax cut. Last year, the debt burden reached 79% of GDP, the highest share since 1948.
Then came the pandemic. The economy tumbled into a sickening free-fall as businesses shut down and millions of Americans hunkered down at home to avoid infection. GDP collapsed at a 31.7% annual rate from April through June, the worst three months on records dating to 1947. In March and April combined, employers slashed a record 22 million jobs.
To help Americans to endure the crisis, Congress passed a $2 trillion relief bill in March. Among other things, the package sent Americans one-time checks of up to $1,200 and temporarily offered the unemployed $600 a week on top of their state jobless benefits.
Economists say that the rescue probably helped keep the economy from sinking into a depression but also that much more assistance is needed.