It wasn’t so long ago that a trillion dollars was an unfathomable amount of money. But now we need to understand just how big a number it is.
As this decade began, and before most of us had ever heard of coronavirus, fiscal conservatives were sounding alarms that the U.S. federal budget deficit would crest $1 trillion in 2020.
Now, triple that number, or maybe even quintuple it.
The U.S. Treasury is committed to funding more than a couple trillion dollars for just one of several coronavirus response bills passed by Congress and signed into law March 27 by President Donald Trump. The CARES Act — the third and by far the largest package of legislation — priced out at $2.2 trillion just by itself, but it will probably not be the last stimulus bill to be passed in efforts to keep Americans and our economy afloat in the wake of COVID-19.
Earlier this week, the president called for another $2 trillion for infrastructure improvements in a fourth coronavirus response package, something House Democrats have also started to discuss.
This is not to say that Congress was wrong to enact the CARES legislation and two stimulus packages that preceded it in quick succession in March. With coronavirus closures causing family finances to teeter and sending businesses to the verge of collapse, lawmakers and the Trump administration had to do something.
These record-setting bailout bills are needed to shore up individuals, companies and critical economic infrastructure until this nation and the rest of the global economy can catch their breath and return to something resembling normalcy, whatever that looks like post-pandemic.
But what has not been debated much, if at all, is how this debt will be recouped, if even a portion can be. It is a topic that deserves more attention, especially as to how it will affect future generations.
Some background is in order to put the dollars into perspective. One trillion dollars —a thousand billion — is almost a quarter of what the U.S. government spends a year.
For the 2019 fiscal year, the federal budget deficit — the gap between what the government takes in and what it spends — reached its highest level in seven years at $984 billion. That was a 26% increase over the prior year, attributed to a combination of falling revenue from 2017 tax cuts championed by Trump, trade war bailouts and increased defense spending.
We’ve been here before, but found our way back, a pathway that is not as apparent now. The deficit had touched the trillion-dollar threshold for four years running during the first term of President Barack Obama.
However, the largest previous deficit was attributed mostly to the Emergency Economic Stabilization Act of 2008, which included the $700 billion Troubled Asset Relief Program bank bailout, enacted at the end of the administration of President George W. Bush in 2008.
The deficit peaked at $1.4 trillion in fiscal year 2009, fueled by TARP and the American Recovery and Reinvestment Act, which was additional stimulus aimed at countering the Great Recession, enacted under Obama in February 2009. The deficit continued at $1.3 trillion in 2010 and 2011, dropped to $1 trillion in 2012 and then fell further to $680 billion by 2013.
For the remainder of the Obama administration, the debt was substantially in check. It fell to $485 billion in fiscal year 2014, dropped to $442 billion in 2015 and then increased in 2016 to $585 billion.
Trump campaigned for president in 2016 on a promise to eliminate the national debt within eight years, but instead it has risen every year of his administration. The deficit climbed to $665 billion in fiscal year 2017, $779 billion n 2018 and finished the 2019 fiscal year in September at $984 billion.
With increased defense spending and bailouts aimed at softening the blow of Trump’s multi-front trade wars, the federal deficit was already projected to reach $1.1 trillion in the 2020 fiscal year, which ends Sept. 30, even before the global pandemic struck.
Some may dismiss the current explosion of the federal deficit and say it is no different than what previous administrations did by bailing out banks and auto manufacturers to combat the Great Recession.
We would like to think there are significant parallels, but it is difficult to draw similarities. The stimulus measures enacted under Bush 43 and Obama during the recession were more targeted and significantly smaller than what has been approved so far to deal with the coronavirus impact. There also were clear expectations with the stimulus packages passed to support banks and auto manufacturers in the Great Recession for those funds to be repaid, and in large part they have been.
Of $442 billion paid out under TARP, $390 billion has been returned and $52.5 billion has been earned by the Treasury on TARP investments.
Similarly, the Housing and Economic Recovery Act, passed under Bush in July 2008, invested $191 billion to save and take control of Fannie Mae and Freddie Mac, two companies which guarantee most of the home mortgages made in the U.S. The principal was not repaid but dividends paid by the companies have exceeded $300 billion.
And Obama’s recovery and reinvestment stimulus cost just $800 billion over five years, from 2009 through 2013 — far less than the $2.2 trillion Coronavirus Aid, Relief, and Economic Security Act that Trump signed into law on March 27.
For now, the most important task at hand is to get this pandemic under control, to save lives and to protect those on the front lines of caring for those sickened with COVID-19.
Funds flowing from the CARES Act will help do some of that. The 880-page bill includes critical support for the health care system as well as financial assistance for individuals, businesses and industries.
What isn’t spelled out is any hope for bringing the federal deficit back under control post-pandemic, as if annual shortfalls of hundreds of billions of dollars should ever be considered a degree of control.
But soon, we urge federal legislators and the Trump administration to consider just what their deficit-driving stimulus measures mean for our future economic security.
— The Columbus Dispatch; Online: https://bit.ly/2V9UFbR