The amount of U.S. government debt will nearly outpace the size of the nation’s economy in the 2020 fiscal year, the Congressional Budget Office said on Wednesday, a level not reached since the immediate aftermath of World War II and a direct result of the pandemic recession.
The federal budget deficit is expected to reach $3.3 trillion for the fiscal year, which ends on Sept. 30, the budget office said. Total debt held by the public is expected to reach an estimated 98 percent of the size of the economy — gross domestic product — for the year. It falls just short of equaling the size of the economy: The last fiscal year when the amount of federal debt was larger than the sum of the nation’s annual economic output was in 1946.
The budget office now expects the debt to exceed the size of the economy in fiscal year 2021. By 2023, it said on Wednesday, it expects the debt as a share of the economy to reach its highest level in American history, surpassing the World War II era.
The United States appeared to have passed the debt milepost in June, when the total debt exceeded the size of a year’s worth of economic output.
The pandemic recession plunged the economy into its sharpest quarterly contraction in growth in nearly 75 years, ballooning the deficit in the process. With millions out of work and businesses shuttered, tax revenues fell for the federal government, along with states and municipalities. Congress and President Trump moved quickly to approve more than $3 trillion in new federal spending to help businesses and individuals through the abrupt slowdown in economic activity. All of those factors converged to send deficits — which had grown steadily even in the expansion years under Mr. Trump before the crisis hit — soaring.
While most economists think the federal government should not be worried about deficit spending in the midst of a severe downturn, concerns over the amount of federal borrowing have hindered bipartisan negotiations over another round of economic assistance this fall. Democrats started talks pushing for a more-than $3 trillion package. Republicans countered with about $1 trillion, citing, in part, concerns over the rising amounts of debt.
But even many deficit hawks in Washington, while alarmed by the swift rise in debt, continue to urge lawmakers to spend more to stimulate the recovery.
“I think we should think and worry about the deficit an awful lot,” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget in Washington, “and we should proceed to make it larger” this fall.
United Airlines said Wednesday that it expects to furlough 16,370 employees starting Oct. 1, when federal restrictions on job cuts that were a condition of government aid end.
The announcement, which comes a week after a similar one from American Airlines, could put further pressure on Congress and the Trump administration to renew the $25 billion in stimulus funding the federal government provided to passenger airlines in March. A union-led effort to extend that funding has received bipartisan support, but lawmakers and the administration are at an impasse over further pandemic relief.
“To be clear, an extension would be the one thing that would prevent involuntary furloughs on October 1 and hopefully delay any potential impact on employees until early 2021,” the airline told employees on Wednesday. Tens of thousands of United employees have already contacted their representatives to renew the funding and the airline encouraged others to do so.
The Oct. 1 cut would affect nearly 7,000 flight attendants, nearly 3,000 pilots and thousands of others who work in maintenance, airport operations and other roles. United had warned 36,000 employees in July that they could be subject to the furlough, but that figure was greatly reduced in large partly because thousands of employees agreed to take buyouts, early retirement or temporary leave.
Airlines have introduced a broad range of voluntary programs to offset costs and save jobs. Some United employees who work in airport operations, at contact centers or in maintenance, for example, have been offered a year of leave during which they will receive health benefits and a quarter of their salary. Flight attendants have been able to sign up for extended leave with health benefits with the right to return to work if flights are available. In both cases, the airline would be able to call the…
Read More: US Debt on Pace to Exceed GDP: Live Stock Market Updates