President Trump this afternoon signed a $2 trillion spending bill to respond to the health emergency, while the Federal Reserve spent the better part of a trillion dollars this week buying bonds of every description and lending money to foreign central banks. That avoided a financial crisis and stabilized the stock market. When I proposed a massive fiscal stimulus on February 27, I looked like a wild-eyed alarmist, and many readers on this site accused me of playing into a Democratic plot to panic the country and wrong-foot President Trump. Market intervention is like buying a present for the birthday of your spouse; if you’re late, you’ll have to pay a great deal more. A fraction of the $2 trillion tab would have maintained confidence in markets if it had been offered a month ago, but no matter: What had to be done had to be done.

That leaves us with a federal deficit of perhaps $4 trillion — the $1 trillion deficit we ran before the crisis despite full employment, another $1 trillion in lost tax revenues, and $2 trillion in additional spending. That’s nearly a fifth of GDP, unprecedented in peacetime. As I explained earlier this week at the Law and Liberty website, the market for U.S. Treasury securities went into free-fall last week, before the Federal Reserve announced an unlimited budget to buy them. That’s a shot over our bow. We can’t run deficits like this forever. I’m an old supply-sider and during the Reagan years I chanted the mantra, “Deficits don’t matter.” But the federal debt was just 30% of GDP when Reagan took office in 1981, vs. about 110% at the end of this year, not counting perhaps $100 trillion in liabilities of the Social Security and Medicare systems.