As congressional lawmakers continue to look towards another stimulus relief package, new data shows that the national debt is expected to reach a level not seen since World War II. A new report released Wednesday by the Congressional Budget Office (CBO) predicted that national debt is expected to exceed the size of the U.S. economy, in part due to the stimulus relief programs enacted in response to the coronavirus pandemic.
According to CBO's analysis, the federal deficit will reach $3.3 trillion this year, more than three times the deficit in 2019 and the largest since 1945. That deficit, according to the date, is expected to push federal debt held by the public to 98% of GDP, whereas it was at 79% for 2019 and just 35% in 2007. The data predicted that in 2021, the federal deficit would push federal debt held by the public to 100% of GDP in 2021 and then 107% in 2023, a number that would be “the highest in the nation’s history.” By 2030, debt would equal 109% of GDP.
The CBO noted that the last time the debt to GDP ratio was this high was in 1946 "following the large deficits incurred during World War II." The CBO and other experts blame this unfounded ratio on "the economic disruption caused by the pandemic and the federal government’s response." Since the start of the pandemic, the government has spent trillions of dollars in efforts to bring aid to the American people and prevent an economic crisis, having passed the $2.2 trillion CARES Act in March and several other measures in the months that followed.
"It was a massive rise in borrowing and quite shocking, but incredibly effective," Wendy Edelberg, former CBO chief economist, told The Washington Post of the recent influx in federal spending amid the pandemic. "On the flip side, this is exactly why we, as a country, want to have room to increase borrowing during times of emergency."
The report comes as lawmakers on Capitol Hill remained deadlocked in negotiations regarding an additional stimulus relief bill. The stall in discussions largely has to do with the price tag of the proposal. Republicans, fearing an increase in the national debt, have long sought to keep the proposal at or below $1 trillion. Democrats, meanwhile, have felt that price tag does not meet the need of the crisis, with their own proposal, the HEROES Act, clocking in at more than $3 trillion.
In response to this difference in viewpoint and the stalled talks, both sides have offered some leniency. Pelosi has claimed that Democrats are willing to come down to $2.2 trillion, whereas Treasury Secretary Steven Mnuchin has indicated that President Donald Trump is willing to sign a $1.3 trillion bill. Senate Republicans, however, are expected to introduce an entirely new proposal that would cost just $500 billion.