Record deficit complicates GOP path to coronavirus relief

Record deficit complicates GOP path to coronavirus relief
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A new government report projecting a record $3.3 trillion deficit this year may make it harder for Republican budget hawks to agree to another COVID-19 relief package.

Wednesday’s report from the nonpartisan Congressional Budget Office (CBO) painted a gloomy outlook by projecting that the deficit for fiscal 2020 will more than double the previous high — $1.4 trillion in 2009 during the height of the Great Recession.

This year’s deficit will also account for 16 percent of gross domestic product (GDP), the highest since 1945. Overall debt is on track to surpass 100 percent of GDP next year, and break its World War II record by 2023, according to the CBO.

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The report factors in $3.6 trillion in spending that Congress approved in four rounds of COVID-19 emergency relief, raising concerns among conservative lawmakers that the cost of the coronavirus package under negotiation could lead to more harm than good.

Sen. Ted CruzRafael (Ted) Edward CruzThe Hill's Morning Report - Sponsored by Facebook - Trump previews SCOTUS nominee as 'totally brilliant' Cruz blocks amended resolution honoring Ginsburg over language about her dying wish Trump argues full Supreme Court needed to settle potential election disputes MORE (R-Texas) is among the fiscal hawks who argue that additional relief measures won’t help.

“Sen. Cruz believes existing proposals in Congress will add even more to the debt without taking meaningful steps to spur economic growth and get Americans safely back to work, which will have devastating consequences for future generations,” Cruz spokesperson Maria Jeffrey said.

On the other side of the Capitol, Republican leaders aren’t firmly opposed to another relief measure, but they’re harshly critical of the one put forth by Speaker Nancy PelosiNancy PelosiPelosi slams Trump executive order on pre-existing conditions: It 'isn't worth the paper it's signed on' On The Money: Anxious Democrats push for vote on COVID-19 aid | Pelosi, Mnuchin ready to restart talks | Weekly jobless claims increase | Senate treads close to shutdown deadline Trump signs largely symbolic pre-existing conditions order amid lawsuit MORE (D-Calif.) and Democrats in May.

“Additional COVID measures must be tailored to meet the remaining needs, and not just a wasteful free-for-all,” said House GOP Leader Kevin McCarthyKevin Owen McCarthyMcCarthy says there will be a peaceful transition if Biden wins GOP lawmakers distance themselves from Trump comments on transfer of power McCarthy claims protests in Louisville, other cities are 'planned, orchestrated events' MORE (R-Calif.).

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“Unlike Speaker Pelosi, the American people know we can’t throw around a trillion dollars here and a trillion dollars there,” he said.

House Democrats passed a $3.4 trillion relief measure in May, while Republican negotiators opened their bid closer to $1 trillion.

Senate Majority Leader Mitch McConnellAddison (Mitch) Mitchell McConnellTrump 'no longer angry' at Romney because of Supreme Court stance On The Money: Anxious Democrats push for vote on COVID-19 aid | Pelosi, Mnuchin ready to restart talks | Weekly jobless claims increase | Senate treads close to shutdown deadline The Hill's Campaign Report: Trump faces backlash after not committing to peaceful transition of power MORE (R-Ky.) said in late July that as many as 20 of the 53 GOP senators would likely vote against any new coronavirus relief bill, in part because of the price tag.

Still, McConnell is working to advance a “skinny,” $500 billion relief bill through the Senate to lay down a marker for negotiations and help give cover to vulnerable members of his party up for reelection. A vote on that measure could come as early as next week, posing a test for what level of support Senate Republicans can muster in their own party for a bill that’s less than half their initial offer.

Those efforts are taking place separate from stalled negotiations between Pelosi and Senate Minority Leader Charles SchumerChuck SchumerPelosi slams Trump executive order on pre-existing conditions: It 'isn't worth the paper it's signed on' 3 reasons why Biden is misreading the politics of court packing Cruz blocks amended resolution honoring Ginsburg over language about her dying wish MORE (D-N.Y.) on one side and Treasury Secretary Steven MnuchinSteven Terner MnuchinOn The Money: Anxious Democrats push for vote on COVID-19 aid | Pelosi, Mnuchin ready to restart talks | Weekly jobless claims increase | Senate treads close to shutdown deadline Vulnerable Democrats tell Pelosi COVID-19 compromise 'essential' Pelosi asks panels to draft new COVID-19 relief measure MORE and White House chief of staff Mark MeadowsMark Randall MeadowsAnxious Democrats amp up pressure for vote on COVID-19 aid Pelosi hopeful COVID-19 relief talks resume 'soon' The Hill's Morning Report - Sponsored by Facebook - GOP closes ranks to fill SCOTUS vacancy by November MORE on the other.

Meadows, in particular, has put the fiscal issue front and center. As a congressman and co-founder of the conservative Freedom Caucus, Meadows frequently railed against bipartisan spending deals because of the hit to the deficit.

Mnuchin, meanwhile, has struck a slightly more optimistic tone, saying in congressional testimony Tuesday that President TrumpDonald John TrumpSteele Dossier sub-source was subject of FBI counterintelligence probe Pelosi slams Trump executive order on pre-existing conditions: It 'isn't worth the paper it's signed on' Trump 'no longer angry' at Romney because of Supreme Court stance MORE agreed that some level of fiscal aid was still necessary.

“Let me say I very much agree with you and those other experts that more fiscal response is needed. The president and I want to move forward with more fiscal response,” he said.

While Democrats have come down from $3.4 trillion to $2.2 trillion and Republicans have come up to $1.3 trillion, they remain bitterly divided over hundreds of billions of dollars in proposed aid to state and local government.

Fiscal experts, including Federal Reserve Chairman Jerome Powell, say bold stimulus measures are needed to help the country dig its way out of the deepest economic downturn since the Great Depression, though many have not put a price tag on those efforts.

Longtime advocates for fiscal restraint argue that even with the new CBO report, debt concerns should not stand in the way of a strong response to the pandemic.

“The warning bells this report contains should not cause a premature end to borrowing, but a commitment to dealing with the debt at the appropriate time,” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget.

“Any additional borrowing must be for needs related to the pandemic, not political pet projects, and we must target those dollars to where they provide the best return on our economic and health care outcomes,” she said.

Shai Akabas, director of economic policy at the Bipartisan Policy Center, added that borrowing now could help lead to a stronger recovery, and ultimately put the country in a better position to address the debt.

“The strange reality is that for the nation’s long-term budget picture to get better, it must get even worse in the short term,” he said. “Doing so will give our economy the best shot to bounce back, and a good recovery now will help lessen budget shortfalls in coming years.”