by Mitch Kokai
Senior Political Analyst, John Locke Foundation
In responding to the coronavirus pandemic and the health and economic catastrophes that it has wrought, politicians from both parties may have found their dream: a problem you really do have to throw money at.
Already, Congress has passed three rescue packages totaling more than $2.2 trillion in new spending and is in the process of negotiating a fourth, all of it financed by borrowing. At the same time, the economy has collapsed, meaning that tax revenues have all but evaporated. As a result, this year’s deficit is predicted to reach $3.8 trillion, 2.5 times the record set after the 2008 recession. Our national debt has already been pushed to more than $24 trillion, and the debt-to-GDP ratio is expected to exceed World War II levels by 2023.
Of course, some will point out that if we are going to borrow massive amounts of money, now is a reasonably good time to do so. For one thing, even most hardcore fiscal conservatives agree that the COVID-19 crisis warrants it. For another, interest rates are extremely low, and the shutdown-induced reduction in consumer demand, which could extend for some time, means inflation is not likely to be a problem in the short term.
Still, we shouldn’t pretend that there won’t be long-term consequences to this federal spending spree. It is vitally important that necessary responses to this crisis not become an excuse for pork-barrel spending or bailouts of favored constituencies, and that temporary measures don’t become permanent new programs.
Indeed, what comes after the crisis is just as important as what we do to combat the crisis. Federal spending went from 55 percent of GDP in 1944 to 16 percent in 1947, as the government cut back after World War II.
As we consider steps to rein in federal spending, it’s also important to block federal efforts to spur unsustainable state government spending. The John Locke Foundation is leading that charge.