“However, challenges in the economy and the labor market are expected to persist for some time. Interest rates on federal borrowing are expected to remain quite low in relation to rates in recent decades.”
The agency’s sobering appraisal of the near-term job market comes after unemployment claims skyrocketed to 26 million over the last five weeks, with 4.4 million claims added in the last week. The pandemic has both physically sidelined Congress and dominated the legislative agenda, with lawmakers enacting four separate bills in the last month totaling more than $2.7 trillion.
That legislation is expected to contribute to a federal deficit that will hit $3.7 trillion this year, CBO said. Federal debt held by the public will be 101 percent of GDP by the end of the fiscal year.
The budget office’s projections don’t account for future legislation, which could again top $1 trillion. Governors have pleaded for at least $500 billion to plug drastic revenue shortfalls. House Democrats and the Trump administration are also eyeing major infrastructure investments and tax cuts that will compound the debt.
CBO noted that interest rates on federal borrowing are expected to “remain quite low,” however, making the debt burden more palatable.
Real GDP is expected to plummet by 11.8 percent in the second quarter. Overall, the economy is expected to shrink by 5.6 percent in 2020, before growing by 2.8 percent next year.
The budget office cautioned that the numbers “are subject to enormous uncertainty“ during the pandemic. Social distancing measures are expected to last through at least June, CBO said, falling off in the second half of this year.
“The agency’s projections also include the possibility of a reemergence of the pandemic,” CBO said. “To account for that possibility, social distancing is projected to continue, although to a lesser degree, through the first half of next year.“
Deficit to soar to nearly $4T as economy buckles, CBO says
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