The United States deficit is set to hit a record this year — a prediction that could further complicate already-stalled negotiations on a COVID-19 relief package expected to include a second round of stimulus checks.
The Congressional Budget Office released a report Wednesday forecasting a $3.3 trillion deficit in 2020. That’s more than triple the shortfall in 2019 and $2.2 trillion more than the figure predicted in March. At that level the deficit would account for 16% of the country’s gross domestic product, the largest share since 1945.
The report pinned the recent deficit surge on the coronavirus pandemic and legislation in response to it.
Prior to the pandemic, the deficit sat at $741 billion, according to the CBO.
Stimulus check complications
The report comes as lawmakers are locked in a stalemate over a COVID-19 relief package and unable to reach an agreement on spending.
The bleak deficit outlook is unlikely to help things along.
It has increased spending hesitations among conservative lawmakers already concerned additional relief costs would do more economic harm than good, The Hill reports.
The roughly $2.2 trillion Coronavirus, Aid, Relief and Economic Security, or CARES, Act passed easily in March, but it was “a large enough step” for some conservative lawmakers who have since reverted back to traditional concerns, such as the nation’s debt, Vox reports.
Among those skittish about massive spending is Sen. Ted Cruz, R-Texas, who has argued more relief measures won’t help mitigate the crisis.
“Sen. Cruz believes existing proposals in Congress will add even more to the debt without taking meaningful steps to spur economic growth and get Americans safely back to work, which will have devastating consequences for future generations,” his spokesperson Maria Jeffrey told The Hill.
Most economists, however, are less troubled by “huge borrowing when the economy is in peril,” per NBC.
Federal Reserve Chair Jerome Powell in April said now is not the time to “act on” concerns about debt.
“This is not the time to act on those concerns,” Powell said, according to Marketplace. “This is the time to use the great fiscal power of the United States to, to do what we can to support the economy and try to get through this with as little damage to the longer-run productive capacity of the economy as possible.”
Where do stimulus checks stand?
Talks about another relief package resumed this week — but to no avail.
In mid-May the House of Representatives passed the Democrats’ $3 trillion coronavirus aid bill, called the Heroes Act, but it was never voted on in the Senate. Senate Republicans introduced their own $1 trillion package, the Health, Economic Assistance, Liability Protection and Schools, or HEALS, Act in late July.
Both plans include another round of the $1,200 payments that were sent to individuals under the CARES Act earlier this year. The HEALS Act includes another $500 for dependents, as the CARES Act did, and the Heroes Act includes $1,200 for dependents.
But what lawmakers can’t agree on is how much to spend. The White House last week offered a $1.3 billion deal, and Democrats have urged meeting in the middle at $2.2 billion. Neither side has budged.
Treasury Secretary Steven Mnuchin on Tuesday said a “bipartisan agreement should still be reached” when he testified before the House coronavirus crisis subcommittee. However, he said he’s unwilling to come up to $2.2 trillion in spending.
White House Chief of Staff Mark Meadows also said during an interview with “Meet the Press” last week that the White House is unwilling to go up from $1.3 trillion and won’t negotiate.
House Speaker Nancy Pelosi, D-California, said last week that once Republicans are willing to meet in the middle “we can sit down and talk.” She’s said their $1.3 offer isn’t enough to help Americans.
“They have to move. They have to move,” she told reporters during a news conference last week. “Why should there be a bill that has far less (than) what the public needs? We have that responsibility. They’re just going to have to come up with more money.”
On Wednesday, she said she had a phone call with Mnuchin during which he suggested lawmakers “do a little now and a little later,” according to CNN.
“Sadly, this phone call made clear that Democrats and the White House continue to have serious differences understanding the gravity of the situation that America’s working families are facing,” she said in a statement, according to CNN.