Concord Coalition executive director Bob Bixby recently moderated a policy discussion on Covid-19, the economy and the federal budget. The event was sponsored by Center Forward, an organization devoted to bringing together Members of Congress and Washington, DC organizations in order to find common ground and bipartisan solutions.
To start the conversation off, the panelists discussed the nation’s economic context. Bixby noted that unemployment grew from 2.5 percent in February to almost 15 percent now. Deficits, which have been steadily increasing for the past five years, will jump from 4.6 percent of the economy (GDP) in 2019 to closer to 18 percent of GDP in 2020. He also noted that deficits have historically hovered around 3 percent. Finally, he mentioned that the nation faced structural fiscal challenges even prior to the current crisis and that “getting back to normal is getting back to an already unsustainable track.”
The next panelist, Douglas Holtz-Eakin, President of the American Action Forum discussed the current economic crisis in historical context. “This event is bigger than anything in our lifetimes by an order of magnitude. Any economic measure you look at is 10 times bigger than anything we have seen before,” said Holtz-Eakin.
He continued that the CBO expects that during the second quarter, “national income will decline by 11 percent. In the worst year of the great depression, 1932, national income fell by 12 percent. We are experiencing the worst year of the great depression this spring.”
Marc Goldwein, Senior Vice President for the Committee for a Responsible Federal Budget, discussed some of the legislation that Congress and the President have passed so far in response to the crisis. He said that compared to the Great Depression, this time the Federal Reserve and Congress have acted “incredibly swiftly” and already sent $1.5 – $2 trillion out the door to a wide range of actors in the economy. “It seems frustratingly slow, but it is the fastest government’s ever moved,” Goldwein said.
He also mentioned that the support does have a cost to the deficit on top of the already unsustainable long-term trajectory we were on which, once we get through the immediate health crisis, makes it “even more import for us to bring our fiscal house in order in a gradual, thoughtful and constructive way.”
Diane Lim, Director of Outreach at the Penn-Wharton Budget Model then talked about how in the short term, the economic situation will be dependent on the decisions that individuals make both on their own and in response to the government orders on going out and engaging in economic activity. “We’re riding the public health wave and the economy will follow along,” said Lim.
Bixby then asked the panel about the possibilities for more economic relief legislation, noting that there is more likely to be partisan disagreement than there has been on the previous bills. Holts-Eakin responded that the next step will be more than just “throwing money at the problem,” and will require thinking about “how to operate the economy in the face of the virus” — an issue, he noted, that will have more disagreement because it’s a harder problem to solve.
Goldwein spoke about how the number one problem will be to fill the fiscal holes in state and local budgets. He also talked about using some time to extend support for the unemployed and for struggling businesses, but to fix some of the problems that have arisen in the process proscribed by the past pieces of legislation. Lim agreed with the need to provide fiscal assistance to state governments.
The panelists ended by agreeing that another relief bill should be enacted soon given the deadlines at the end of June and July for the current support programs.
