U.S. National Debt on Track to Surpass Size of Economy

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The US has spent trillions of dollars fighting the coronavirus pandemic. All of that spending is pushing the nation towards a new milestone next fiscal year the Congressional Budget Office. Says US government debt is expected to exceed the size of the economy for the first time since World War. Two K. Davidson covers economic policy for the Wall Street Journal Hi Kate thanks for joining me Hi emery. Thanks for having me. So put this in context for us the last time the national debt was this high was World War Two, very different times in our history but these periods actually have a lot in common when it comes to national debt. That's right. The debt has been rising this spring in part because policymakers have even said, they view this moment as as a battle as almost a war against US global pandemic, they've spent trillions to try to cushion the economy from the negative effects who has businesses have closed down. Millions of people are out of work. They've approved a ton of money to get people enhanced unemployment. Benefits stimulus checks, emergency loans, and then also, of course, things like vaccine research and aid for hospitals. So all of that is going towards fighting would they do as this threat that's on on par with what we experienced during wartime. So the vast majority of this spending was, as you say to combat the coronavirus, can you detail some of the largest expenditures under those efforts? So the the? Biggest factors were, yes. All these stimulus measures I would say in the big ones were the the stimulus checks that went out. Remember most Americans got a twelve hundred dollars per person checks and and five hundred dollars for dependent children that was several hundred billion dollars. Congress also devoted a ton of money to the paycheck protection program. Those are those emergency loans for small businesses. That was another huge component between two bills. It was over five, hundred, billion dollars I think about six, hundred, billion actually, and then the third one is enhanced unemployment benefits. Stra six hundred dollar weekly checks that people have been getting on top of regular unemployment benefits. Those of course expired at end of July so that spending is coming down a little bit but all of those were. Big, pieces of this overall efforts to help the economy right now. Now, Congress is still debating whether to provide additional stimulus relief. How does the nation's debt load now play into these discussions among lawmakers? Well, I think it's it seems to be an important. Although both sides will sort of point fingers over whether these concerns are genuine Republicans have cited rising debt certainly is a big concern. A reason to be cautious about borrowing more Democrats are saying you know we we need to borrow now to protect the economy and it's worth it to take on more debt. If you're making sure that you're protecting economic growth on because leaving millions of people out of work at they're losing their homes businesses or closing can have long term negative effects on the economy. So they're saying it's worth it right. Now, and some of them are also pointing out that you know Republicans approved a very large tax cut a couple years ago that has constrained revenues and definitely both sides have approved big spending increases in recent years. So there's plenty of blame to go around but I think right now most people in most economists are saying debt should not be the top concern. So some some Republicans have acknowledged even some in the administration are saying look we we can't afford this right now especially, because interest rates are so low and we should do more. Right, and you spoke to some economists who said that despite the big economic contraction in the second quarter, this could have been much worse without some of the fiscal support detailed. That's right and we can see that in the data there are some some groups that break this down they look at the contributions of federal spending to overall GDP and right there was a a big drop off in the second quarter but we saw that fiscal stimulus spending by the federal government actually contributed but had a very positive effect in in other words supported supported economic output and made sure that it wasn't even worse. So you know just because of the way that. GDP is calculated and that's that's fairly typical during a recession. We see governments come in and do it the question right now as well. How much more support is the economy really need and I, think some people are worried that there. We could see because of these debt concerns we could see a situation where what we saw after the last recession where some people argue Congress pulled back on this support to quickly they pulled back too soon and that just really slowed the recovery. So so some folks are saying look don't make that mistake this time around yes. Debt is very high but we we can afford it. There's still big demand for US

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