The Coronavirus Aftermath: Debt and Deficits as Far as the Eye Can See

All the Woulda-Coulda-Shouldas
Layin’ in the sun,
Talkin’ ’bout the things
They woulda coulda shoulda done…

–Shel Silverstein

As of this writing, the Trump Administration has pledged to spend more than a trillion dollars to save the lives and livelihoods of Americans as a result of the coronavirus outbreak. We’re not here to criticize the here and now of fiscal stimulus, but instead want to remind lawmakers of what they shoulda, coulda, but wouldna.

Eleven years ago this month, the market hit the climactic bottom of the Great Recession.  Since then, the U.S. experienced the longest run of economic growth — albeit underwhelming — since the government began tracking the business cycle in 1854.  The economy saw 42 continuous quarters of economic growth, America’s gross domestic product (GDP)  increased by more than 25 percent, unemployment was at record lows.

But instead of paying down the debt and right-sizing government, both Administrations went on a spending binge.  The Obama Administration added $3.64 trillion to the national debt. The Trump Administration added another $3 trillion. It’s anybody’s guess how high coronavirus spending will increase the already staggering $23 trillion national debt.  As Reason’s Eric Boehm wrote in a recent article, “Having failed to be fiscally responsible when it would have been relatively easier, our elected officials now face an impossible choice: oppose politically popular deficit spending in response to the coronavirus outbreak, or try to stimulate growth by backing policies that will harm the country’s long term economic stability. They will almost certainly (with a few exceptions) choose the former.”

Whether the coronavirus outbreak will last two months or 18-months, we have no doubt that American ingenuity and grit will see us through.  But the Old New Normal of anemic growth will return, this time burdened with even more staggering debt.  The question is whether during the good times, we can make the necessary structural changes such as those outlined by PRI economist Wayne Winegarden in his Beyond the New Normal series: policies that encourage growth-enhancing incentives, production efficiencies, market-based prices, and of course, fiscal prudence.

Another black swan event like the coronavirus will come again, but will we have the resources to prevail?  Or will those Woulda-Coulda-Shouldas … run away and hid … with the one little Did.

Rowena Itchon is senior vice president at the Pacific Research Institute.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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