The national debt held by the United states is rapidly approaching the $27 trillion mark. As of May, the nation had projected adding more than $3 trillion to the debt as a result of the COVID-19 crisis. This number only promises to rise as negotiations for another round of economic stimulus heats up. Read More »
The novel coronavirus that began to appear near the end of 2019 has infected millions of Americans and killed more than 150,000 of them as of early August. While the U.S. has the largest number of citizens affected by COVID-19, the situation around the globe has also gotten worse. Many localities have had trouble caring for the sick. Those with severe illness have inundated hospitals and strained their ability to handle the influx of new patients. Many people have lingering effects from the disease after a so-called period of recovery.
The costs of doing nothing in relation to the coronavirus would likely lead to poor economic outcomes in addition to a decrease in the productivity of those who experience short- and long-term disability because of the virus. Additionally, the cost of health insurance in the United States is likely to go up in the near term as a result of so many lengthy hospitalizations that involve invasive ventilation and supplemental oxygen.
The last major event that transformed life for Americans to such a degree was likely World War II. During this era, there were widespread restrictions on consumer goods. Rationing of food and gas was the rule, rather than the exception. People in the 1940s were used to privation. They experienced the Great Depression. The COVID-19 crisis has contributed to unemployment rates that are the worst in decades. Nearly 15% of Americans were unemployed in April 2020. While that number declined to 11.1% by June, the rising number of COVID cases has led states that were originally cavalier about reopening to shut down bars, limit restaurant capacities and recommend, if not outright require, facial coverings. This could lead to an increase in the number of unemployed Americans in the months to come.
Additionally, with the Paycheck Protection Program, many employers merely furloughed their employees. Those supposedly temporary furloughs might turn into long-term unemployment for many people in the coming weeks. Most of the earlier economic stimulus went to business entities. However, most individuals and families received stimulus checks, and many received an additional $600 per week in enhanced unemployment benefits to help them weather the economic storm.
Some Republicans in the Senate now question whether another round of stimulus will be in the best interest of the U.S. because of the growing debt load. The Democratic-led House of Representatives passed the HEROES Act in May, but it stalled in the Senate. That legislation came with a price tag of about $3 trillion in addition to the $3 trillion already spent on coronavirus relief.
Senate Republicans, led by Majority Leader Mitch McConnell, started negotiations with another plan with an initial cost of about $1 trillion. These negotiations are not finished, but the final bill will likely come in between the $1 trillion and $3 trillion figures. Legislative leaders and Secretary of the Treasury Steve Mnuchin have indicated that most Americans can expect to see a $1,200 stimulus check heading their way once the final legislation goes through. All adults in the household would get the $1,200 check in addition to $500 for each dependent. A single adult would receive $1,200 while a married couple with three children would receive $3,900 under this plan.
However, the current Republican proposal is not written in stone, and President Donald Trump indicated that the dollar amount attached to the stimulus checks may be even higher. Larger checks would mean an even larger deficit and a higher level of debt. Economic output in the United States dropped by more than 30% during the second quarter of the year, and this will cut revenue collections substantially.
There is no doubt that a large measure of stimulus is necessary to combat the economic impact of the coronavirus. However, many economists worry that the current level of debt in the U.S. is unsustainable as it has reached a level not seen since World War II in debt-to-GDP terms. Ideally, a widespread and effective vaccine would be able to cut the spread of COVID-19. Effective pharmaceutical treatments might come online to treat its symptoms. Unless these developments happen, it is likely that the nation’s debt will continue to increase rapidly, and that could have negative repercussions for decades into the future.
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