WSJ: U.S. Gov’t Debt To Exceed Size Of Economy For First Time Since WW2

Anthony T. Pope / CC BY-SA 4.0 / Wikimedia (cropped)

JakeThomas

The federal government's pandemic response is expected to push the national debt past the size of the entire US economy.

According to The Wall Street Journal, U.S. government debt will surpass “the size of the economy in the government’s 2021 fiscal year, a milestone not hit since World War II that has been brought into reach by a giant fiscal response to the coronavirus pandemic.”

  • “The Congressional Budget Office said Wednesday that federal debt held by the public is projected to reach or exceed 100% of U.S. gross domestic product” the report continued, “the broadest measure of U.S. economic output, in the fiscal year that begins on Oct. 1.”
  • However, the significant upswing in borrowing has not yet generated “angst among investors or hampering the U.S.’s ability to borrow more,” the Journal reported.

Investors have gobbled up U.S. Treasury assets, drawn to their relative safety. Moreover, interest rates are expected to remain low, suggesting the government still has plenty of room to borrow.

  • Government response to the pandemic by the end of June had caused “total debt [to swell] to $20.5 trillion from $17.7 trillion at the end of March,” per the report, which represents “a 16% increase over just three months, according to Treasury Department data.”
  • Trimming the nation’s debt “hasn’t in recent years been a priority of lawmakers in either political party—a factor that facilitated bipartisan support for earlier pandemic stimulus packages.” However, Democrats and Republicans are now at odds over further spending, with some Republicans arguing against any further spending at all.

Federal Reserve Chairman Jerome Powell and some economists have said Congress needs to do more to support the nascent recovery, especially with unemployment in double digits and the virus continuing to spread throughout the country. The pandemic has forced many states to alter reopening plans and could temper the economic rebound expected this summer.

“I think we’re going to continue to see the U.S. economy recover,” Tyler Goodspeed, the acting chairman of President Trump’s Council of Economic Advisers, said at a press briefing last month. “It would recover a lot faster, and with much less long-term scarring, with additional support.”

Read the full report.

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