You already know that the Coronavirus is causing a deep recession and record budget deficits.
How bad is it?
According to the Congressional Budget Office, the U.S. is likely to have a deficit of $3.7 trillion in 2020. At the start of this year the deficit was expected to be $1.0 trillion, but because of COVID-19 the U.S. will spend an extra $2.5 trillion, according to JP Morgan estimates.
It’s hard to get your head around $2.5 trillion. How big is that?
Well, $2.5 trillion is about what America spends on the three biggest government programs combined: Social Security ($1.1 trillion), Medicare ($800 billion), and national defense ($700 billlion).
Yeah, I’m using round numbers.
But all of these numbers are estimates anyway since there’s no way of knowing how the Coronavirus will affect our economy this year.
So what’s the good news?
First, it’s good news that America is willing to spend $2.5 trillion. It is easy to complain about how polarized the U.S. has become in recent years and how hard it is to get anything done.
But Congress has passed the CARES Act very rapidly in response to the Coronavirus, and the government acted much faster in 2020 than it did during the financial crisis of 2008-2009.
Second, it’s good news that the U.S. is able to spend $2.5 trillion. Most countries in the developing world are in no position to spend this kind of money. Developing economies depend heavily on industries like oil, mining, tourism, and manufacturing. These sectors have been devastated by quarantines and by a collapse in global demand.
Meanwhile, the U.S. economy gets a lot of revenue from technology and from the service sector. It is easier for companies in these sectors to operate during quarantine, and demand for their services has not collapsed because of Coronavirus.
So as bad as it has been in the U.S., it could have been much worse.
Yes, I know that people will complain that government programs have been fast, but the programs have not been fair. Many people feel that they have been overlooked and many small businesses are struggling to survive.
I can’t argue with that. It is hard for the government to be both fast and fair.
For now, I’m just counting my blessings that we live in a democracy that is willing and able to act when a crisis hits.