BPC's Hoagland: Nation’s Fiscal Situation Deteriorating Rapidly
Washington, DC – The following is a statement from Bill Hoagland, senior vice president at the Bipartisan Policy Center, on new projections of a record monthly federal budget deficit during April:
“As we combat a historic public health threat, the nation’s fiscal situation is deteriorating at an unprecedented rate. Today’s budget deficit estimate from the Congressional Budget Office is our first glimpse into what will quickly become the new norm of monthly shortfalls on the order of hundreds of billions of dollars. The Treasury Department will release its own official estimates next week, which we expect to reaffirm this reality.
“The $737 billion deficit that CBO estimates for the month of April shattered previous records, more than doubling the size of any monthly deficit as a share of the economy in the past 40 years. The elevated figure largely reflects a massive federal response to the health and economic threats posed by the pandemic. In addition, tax revenues have been severely depressed from the economic shutdown and the delay of the April 15 tax filing deadline. This monthly deficit figure is even more striking because the government usually runs a big surplus in April, the month when many income tax payments normally flow into the Treasury. Instead, this was the first April with a deficit since just after the Great Recession.
“The immediate focus must remain on policies to protect public health; provide relief to American families, workers, and businesses; and promote a fast recovery. Indeed, the best way to shrink the budget deficit is to limit immediate economic damage and restore growth as quickly as possible. To do that, as Federal Reserve Chairman Jerome Powell indicated, more federal support will be needed.
“But today’s jaw-dropping figure serves as a reminder: We must be clear-eyed about the difficult decisions that lay ahead, which are too large for the usual partisan gridlock. Our government has developed the bad habit of letting deficits run unchecked during good times, appropriately increasing borrowing during crises, and then failing to restore fiscal balance when the emergency has passed. With each cycle, the debt piles higher. Eventually, we will lose our fiscal capacity to respond to future emergencies when they inevitably come. Congress and the administration must break this cycle as soon as the economy is firmly on the road to recovery. We cannot afford another decade of inaction.”
Bill Hoagland and Shai Akabas are available for comment.