The stimulus packs adopted in the past two months need to be covered by loans
Since the US declared a state of emergency and the economy locked down, the Senate passed four stimulus packages to help the economy from collapsing. Overall, the packages are worth more than $3 trillion.
Yesterday, the Treasury Department announced that during this trimester will borrow $3 trillion to cover the cost of the stimuli. Besides the incentives, it will include the tax revenue that is postponed until June and a probable increase of the Treasury cash balance.
During the last quarter, the Treasury borrowed approximately $500 billion. For the third trimester, another $677 billion is in sight. Because the interest rate is at a historic low of 0.6%, the government affords to borrow more and more as money is cheap.
The federal budget deficit will reach $3.7 trillion by the end of the current fiscal year, according to the Congressional Budget Office. The current deficit is $744 billion. The national debt will surpass the annual economic output, with a future ration of federal debt to GDP of 101%. According to the New York Times, this would be the most significant deficit since World War II. Also, the GDP growth will nosedive 40% in the second quarter at the same time last year.
The CBO expects the economy to contract 5.6% this year. The unemployment rate will reach 16% during the third trimester, and by the end of 2020 it will be at 11.7%, as, until now, more than 26 million people filed for unemployment benefits.
More about the matter will be discussed in a two-day meeting starting on Wednesday.
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Sources: forbes.com, yahoo.com, cnbc.com, nytimes.com
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