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Concord Coalition: The Current US Fiscal Situation (October 2020)

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Concord Coalition: The Current US Fiscal Situation (October 2020)

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A chart talk from The Concord Coalition analyzing the fiscal challenges facing the US before COVID, and how the economic impact of COVID and the federal response has made that situation even more difficult.

A chart talk from The Concord Coalition analyzing the fiscal challenges facing the US before COVID, and how the economic impact of COVID and the federal response has made that situation even more difficult.

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Concord Coalition: The Current US Fiscal Situation (October 2020)

  1. 1. The Concord Coalition COVID in the Shadow of Debt
  2. 2. Before COVID-19, federal debt was already approaching record levels Source: Congressional Budget Office THE CONCORD COALITION Percent World War I Great Depression World War II Great Recession
  3. 3. Caused by a long-standing structural imbalance between revenues and spending Source: Congressional Budget Office, Update to the Budget Outlook, September 2020 THE CONCORD COALITION Outlays Revenues Projected Average 1970-2019: 20.4% Average 1970-2019: 17.4% 23.0% 17.8% ● ●
  4. 4. Unemployment jumped 10 points in one month and still remains historically high Source: Bureau of Labor Statistics, Unemployment Situation Report THE CONCORD COALITION
  5. 5. The COVID-induced recession is deep Source: Bureau of Economic Analysis THE CONCORD COALITION Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2018 2019 2020
  6. 6. The federal fiscal response to COVID-19 has been significant but appropriate THE CONCORD COALITION March 18 H.R.6201 Family First Coronavirus Response Act $192 billion March 27 $1,721 billion H.R.748 Coronavirus Aid, Relief, and Economic Security (CARES) Act March 6 $8 b H.R.6704 Coronavirus Preparedness and Response Supplemental Act April 24 $483 billion H.R.266 Paycheck Protection and Health Care Enhancement Act
  7. 7. With significant consequences on near-term budget deficits Source: Congressional Budget Office, Update to the Budget Outlook, September 2020 THE CONCORD COALITION March Baseline March Baseline COVID-19 + Interest COVID-19 + Interest Trillions $1.1 T $2.0 T $1.0 T $0.8 T $3.1 T $1.8 T
  8. 8. Post-COVID, a record no one wants Source: Congressional Budget Office, Update to the Budget Outlook, September 2020 THE CONCORD COALITION Projected
  9. 9. Our nation’s fiscal challenges do not end with COVID-19 Source: Congressional Budget Office, The Long-Term Budget Outlook, September 2020 THE CONCORD COALITION 2019 2025 2030 2035 2040 2045 2050 Projected Waning Budgetary Effects of COVID-19 Percent -12.6 -4.6
  10. 10. Growing deficits and debt remain long after the budgetary effects of COVID are gone THE CONCORD COALITION 2019 2025 2030 2035 2040 2045 2050 195 78 Source: Congressional Budget Office, The Long-Term Budget Outlook, September 2020
  11. 11. Entitlements and interest costs drive spending Source: Congressional Budget Office, The Long-Term Budget Outlook, September 2020 THE CONCORD COALITION
  12. 12. Revenue growth is constrained by factors affecting output Source: Congressional Budget Office, The Long-Term Budget Outlook, September 2020 THE CONCORD COALITION Potential Labor Force Size Potential Labor Force Productivity Percent 2.4 1.6
  13. 13. Change in Revenues as a Percent of GDP Source: Congressional Budget Office, The Long-Term Budget Outlook, September 2020 THE CONCORD COALITION Percent Expiring tax provisions *Other Real bracket creep (wage growth > economic growth) *COVID response, rising taxable retirement income, faster earnings growth among higher income earners, rising cost of non-taxable fringe benefits
  14. 14. Delay makes policy solutions more challenging Source: Congressional Budget Office, The Long-Term Budget Outlook, September 2020 THE CONCORD COALITION Deficit reduction needed by starting in fiscal year… …to reach debt equal to 2019 level in 2050 (79% GDP) …to reach debt equal to 2020 level of GDP in 2050 (100% GDP)$730 billion savings in yr 1 $900 billion savings in yr 1
  15. 15. Why should YOU care about the debt? • Like climate change, once debt becomes a conspicuous problem, it may be too late. • Rising debt reduces the fiscal space needed to respond to the next crisis (natural disasters, war, pandemic) • Interest costs, even under low interest rates, will grow and crowd out needed investments (student loan reform, green energy, broadband) • Politicians have strong incentives to leave the debt problem for future generations – an irresponsible and immoral legacy to leave for our children • We can change this trajectory by demanding answers and action from our elected officials. THE CONCORD COALITION

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