Alarm Bells Sound Over Historic Deficit Spending as Coronavirus Repsonse Could Hit $5 Trillion

WASHINGTON, D.C. – That’s more than the entire federal budget during a “normal” fiscal year. A relatively small percentage of that spending has a sufficient relation to demonstrable coronavirus impacts. Few have been willing to raise red flags over the sudden avalanche of unfathomable spending bills, afraid their hesitancy would be construed as ‘mean-spirited’ while the country reels from a pandemic panic.

Some are sounding the alarms, though, and we’re glad for it. While Bernie Sanders has dropped out of the presidential race, the Wuhan virus may be working to enact his style of massive spending for him. If these alarms are not raised, the federal spending habits will loose all remaining connection to reality. Modern Monetary Theory will have been adopted by default.

From Fox News:

“The U.S. government is poised to spend an unprecedented sum of money on its response to the coronavirus crisis, with a potential final price tag of nearly $5 trillion if lawmakers get the full extent of what they’re seeking in as many as five separate bills.

While there is a bipartisan consensus on the need to help millions of laid-off or furloughed workers, as well as struggling hospitals and local governments, fiscal hawks are starting to raise alarms about the pace and scale of the spending by Congress and President Trump.

With three “phases” of the coronavirus response already passed, the U.S. government has so far committed roughly $2.4 trillion to relief efforts. But two more pieces of legislation are being discussed that could roughly double that, if the most expensive proposals are, in fact, signed into law.

For anyone short of Amazon CEO Jeff Bezos, the sum is so large as to be essentially inconceivable. But put into context, that would be more than the annual federal budget.

The $5 trillion number, adjusted for inflation, would also be more than five times the amount spent on the entire New Deal in the 1930s and just under three times the total cost of the Temporary Asset Relief Program (TARP) and the American Recovery and Reinvestment Act (ARRA) combined — the two pieces of legislation enacted by the Bush and Obama administrations to pull the U.S. out of the 2008 Great Recession.

The counter-coronavirus spending is being done in a bipartisan manner with overwhelming support as few on either side of the aisle have brought up the potential fiscal impacts of the expenditures, despite the fact conservatives decried TARP and ARRA as wildly irresponsible deficit spending just a decade ago.

The initial coronavirus funding bill passed in early March — as the seriousness of the crisis was beginning to dawn on President Trump and members of Congress — cost $8.3 billion. The second phase, which was only scored by the Congressional Budget Office last week, cost $192 billion. And the third phase — officially named the CARES Act and signed into law by Trump before the end of March — cost a whopping $2.2 trillion.

There are some hiccups along the way to the next phase.

Senate Majority Leader Mitch McConnell, R-Ky., on Thursday tried to advance a stopgap proposal to infuse $251 billion in the popular small business assistance program from the CARES Act in what is essentially “phase 3.5” of Congress’ coronavirus response. It was blocked by Democrats, and House Speaker Nancy Pelosi, D-Calif., has said that she wants $500 billion worth of spending in the interim package before dropping at least another $1 trillion — and potentially much more — on a “phase 4” coronavirus bill.

Trump has expressed a desire for the government to OK another $2 trillion for coronavirus relief, focused on infrastructure.

That means the federal government’s total spending on its coronavirus response could reach $4.9 trillion.

The federal government spent $4.45 trillion in all during 2019. Another $5 trillion would be more than 20 percent of the total national debt, which is just over $24 trillion.

Some of the expenditures in the coronavirus response legislation are in the form of loans that could be paid back to the government, like TARP loans were during the Obama administration. Additionally, the stimulus measures are aimed at preventing an economic collapse resulting from the social distancing measures and forced closures meant to reduce the spread of the coronavirus — a scenario that would contribute to the growth of the federal deficit due to lost revenues.

But the approach nevertheless will see deficits swell and the debt grow in the near-term.

Fiscal hawks, who typically would be expected to raise hell over such spending approved so quickly by Congress, have largely been silent. This is due to the fact this spending was seen as instrumental in the government’s response to a public health disaster. Outside of Rep. Thomas Massie, R-Ky. — whose procedural tactics to delay the CARES Act in the House were steamrolled in one minute and three seconds — most of the typical fiscal watchdogs have held their tongues or been muzzled by congressional leadership.

This is beginning to change, with the Committee for a Responsible Federal Budget, a federal spending watchdog organization, among the voices now speaking up.”


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