American non-state, non-profit watchdog the Committee for a Responsible Federal Budget (CRFB) has drafted a report projecting that US public debt will exceed the country's GDP in 2020. According to the CRFB, the recent $2 trillion relief bill, passed by the Congress and signed by Trump, led to the US budget deficit skyrocketing to $3.8 trillion, or 18.7% of the country's total projected GDP in 2020. The watchdog projects that the budget deficit will fall to $2.1 trillion, or 9.7% of GDP, by the end of next year.
The CRFB noted in its report, however, that the projections are based on a scenario that no more relief bills will be passed and no changes to the tax system are made, along with the assumption that the American economy will quickly recover from the pandemic.
"These projections almost certainly underestimate deficits, since they assume no further legislation is enacted to address the crisis and that policymakers stick to current law when it comes to other tax and spending policies. The projections also assume the economy experiences a strong recovery in 2021", the watchdog suggested.
If either of the conditions is not met, then the public debt could continue to grow, reaching some 117% of the country's economy by the end of 2025. However, the CRFB assumes that the American economy will have fully recovered and returned "to its pre-crisis trajectory" by that time.
The watchdog stressed in its report that the borrowings that were undertaken by the Trump administration and are expected to cause the US public debt to soar were "both inevitable and necessary in light of the current pandemic". CRFB President Maya MacGuineas noted that these funds are required to not only save lives, but also to save the American economy.
"Combating this public health crisis and preventing the economy from falling into a depression will require a tremendous amount of resources – and if ever there were a time to borrow those resources from the future, it is now", MacGuineas said.
