Wednesday, September 23, 2020
Home News COVID-19 America's perfect storm: coronavirus + trillions in new debt

America’s perfect storm: coronavirus + trillions in new debt

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The US federal government plays a key role in responding to any major national emergency. Such is the case with the coronavirus pandemic.

All urgent and necessary actions by Washington should be well-balanced and thought out and not over exasperate the pre-existing ongoing crisis of America’s already immense public debt.

To combat the economic consequences of COVID-19, congress and President Donald Trump have resorted to emergency fiscal measures with huge government expenditures.

These steps will allow small business owners not to lay off their employees and make these small and medium-sized businesses more stable in the face of new economic difficulties. Furthermore, they provide temporary tax benefits for companies and individuals affected by quarantine.

America’s financial prospects were very worrying even before the onset of the coronavirus pandemic. If Congress does not take the necessary measures to reform what led to rising costs, then the government debt crisis will only deepen.

Gross national debt exceeds $23.5 trillion

Gross national debt already exceeds $23.5 trillion, which is more than the entire US economy. The forecast of the Congressional Budget Office, published before the coronavirus pandemic, says the annual deficit will exceed $1 trillion in the foreseeable future, with the deficit growing at a rate that will exceed economic growth.

Today, America is wary of the Italian scenario of the spread of a deadly disease (tens of thousands of people have become infected in the country), and state governors have recently taken incredible steps to reduce the rate of penetration of COVID-19. Thus, numerous “not very important” enterprises are being closed, which could potentially cause a destructive wave of layoffs and bankruptcies in the US. These economic consequences of quarantine can last much longer than the health emergency itself.

The federal authorities are well aware of the threats to the economy and peoples finances associated with coronavirus and are trying to act quickly. First, Congress earmarked $8.3 billion under the Coronavirus Preparedness and Response Supplemental Appropriations Act to meet the growing needs of medicine and increase small business credit access for catastrophic events.

Soon after, the president declared a state of emergency in connection with the pandemic, as a result of which the states, settlements and territories can receive federal financial assistance totaling $50 billion.

More recently, Congress passed the Families First Coronavirus Response Act, which provides, among other things, from the federal budget to pay two-week leave for most company employees of up to 500 people – at least two-thirds of earnings . For the implementation of this law alone, authorities allocate more than $100 billion.

The third anti-crisis legislative package is expected increase the deficit by $2 trillion.

Today, America is wary of the Italian scenario of the spread of a deadly disease (tens of thousands of people have become infected in the country), and state governors have recently taken incredible steps to reduce the rate of penetration of COVID-19. Thus, numerous “not very important” enterprises are being closed, which could potentially cause a destructive wave of layoffs and bankruptcies. The economic consequences of quarantine can last much longer than the emergency itself.

The threats to the economy

Federal authorities are well aware of the threats to the economy and finances associated with coronavirus and are trying to act quickly and targetedly. First, Congress earmarked $ 8.3 billion under the Coronavirus Preparedness and Response Supplemental Appropriations Act to meet the growing needs of medicine and increase small business credit access for catastrophic events.

Soon after, the president declared a state of emergency in connection with the pandemic, as a result of which the states, settlements and territories can receive federal financial assistance totaling $ 50 billion.

More recently, Congress passed the Families First Coronavirus Response Act, which provides, among other things, from the federal budget to pay two-week leave for most company employees of up to 500 people – at least two-thirds of their normal earnings . For the implementation of this law alone, authorities allocated more than $100 billion.

Some experts are urging lawmakers not to increase the deficit so much in such difficult economic times, as this may increase the threat of a government debt crisis. Despite the need for a quick response to an emergency, federal authorities must adhere to financial responsibility and economic feasibility.

As soon as the spread of coronavirus can be stopped, lawmakers must begin critical work to reform key drivers of spending growth in order to avoid a public debt crisis and ensure that the federal government operates on a sustainable budget basis, which in turn will help prepare better for future major shocks such as the unfolding pandemic.

Lena S.
Lena is an adventurous soul searching the world for truth and balance. She is a mother of 2 beautiful daughters and a full time writer for Financial News where she covers various topics from finance, government, politics, current events, crypto and technology.

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