Tori GormanPolicy Director, The Concord Coalition

The Federal Budget,

COVID-19,

and YOU

U.S. Unemployment Rate (U-3)

3.6% 3.5%4.4%

14.7%

13.3%

11.1%10.2%

8.4%

0%

2%

4%

6%

8%

10%

12%

14%

16%

Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20

Source: Bureau of Labor Statistics, Unemployment Situation Report THE CONCORD COALITION

The Economy is in Recession

3.8 2.7 2.1 1.32.9

1.5 2.6 2.4

-5.0

-32.9-35

-30

-25

-20

-15

-10

-5

0

5

10

2018 2019 2020

Percent Change in Real Gross Domestic Product (Annualized)

Source: Bureau of Economic Analysis THE CONCORD COALITION

The federal fiscal response to COVID-19 has been significant but appropriate

THE CONCORD COALITIONMarch 18

H.R.6201

Family First

Coronavirus

Response Act

$192 billion

March 27

$1,721 billion

H.R.748

Coronavirus Aid, Relief, and Economic Security (CARES) Act

March 6

$8 b

H.R.6704

Coronavirus

Preparedness

and Response

Supplemental

Act

April 24

$483 billion

H.R.266

Paycheck Protection

and Health Care

Enhancement Act

With significant consequences on near-term budget deficits

($4)

($3)

($2)

($1)

$0

FY 2020 FY 2021

Source: Congressional Budget Office, Update to the Budget Outlook, September 2020 THE CONCORD COALITION

March

Baseline

March

Baseline

COVID-19

+ Interest

COVID-19

+ Interest

Trillions

$1.1 T

$2.2 T

$1.0 T

$0.8 T

$3.3 T

$1.8 T

Post-COVID, a record no one wants

106%

98%

104%106%

107% 107% 107% 107% 106% 107% 107%109%

92%

94%

96%

98%

100%

102%

104%

106%

108%

110%

WorldWar II

2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Debt Held by the Public as a Percent of GDP

Source: Congressional Budget Office, Update to the Budget Outlook, September 2020 THE CONCORD COALITION

Projected

Our nation’s fiscal challenges do not end with COVID-19

-18

-16

-14

-12

-10

-8

-6

-4

-2

02019 2024 2029 2034 2039 2044 2049

Deficits as a Percent of GDP

Source: Congressional Budget Office, The Long-Term Budget Outlook, September 2020 THE CONCORD COALITION

2019 2025 2030 2035 2040 2045 2050

Projected

Waning effects

of COVID-19

Entitlements and interest costs drive spending

1.4% 1.6%

2.3%

6.3%

-1.4%-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

Social Security Medicaid, CHIP,and Exchange

Subsidies

Medicare Net Interest All Other

Change in Outlays as a Percent of GDP, 2019-2050

Source: Congressional Budget Office, The Long-Term Budget Outlook, September 2020 THE CONCORD COALITION

Revenue growth is constrained by factors affecting output

1.5 1.3

0.9

0.3

0.0

0.5

1.0

1.5

2.0

2.5

3.0

1990-2019 (Historical) 2020-2050 (Projected)

Change in Drivers of Potential GDP Growth

Source: Congressional Budget Office, The Long-Term Budget Outlook, September 2020THE CONCORD COALITION

Potential Labor Force Size

Potential Labor Force

Productivity

Percent

2.4

1.6

Change in Revenues as a Percent of GDP

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

2020 2025 2030 2035 2040 2045 2050

Source: Congressional Budget Office, The Long-Term Budget Outlook, September 2020 THE CONCORD COALITION

Percent

Expiring tax provisions

*Other

Real bracket creep (wage growth > economic growth)

*COVID response, rising taxable retirement income, faster earnings growth among higher income

earners, rising cost of non-taxable fringe benefits

Delay makes policy solutions more challenging

4.8%

3.6%

2.9%

5.9%

4.4%

3.6%

2035

2030

2025

Deficit Reduction Needed as a Percent of GDP

Source: Congressional Budget Office, The Long-Term Budget Outlook, September 2020 THE CONCORD COALITION

Deficit reduction neededby starting in fiscal year…

…to reach debt equal to 2019 level in 2050 (79% GDP)

…to reach debt equal to 2020 level of GDP in 2050 (100% GDP)$730 billion savings in yr 1

$900 billion savings in yr 1

Why should YOU care about the debt?• Like climate change, once debt becomes a conspicuous problem, it may be

too late.

• Rising debt reduces the fiscal space needed to respond to the next crisis

(natural disasters, war, pandemic)

• Interest costs, even under low interest rates, will grow and crowd out needed

investments (student loan reform, green energy, health insurance for all,

nextgen infrastructure)

• Politicians have strong incentives to leave the debt problem for future

generations … YOURS.

• As a consequence, your generation will be less wealthy and have fewer

opportunities than your parents.

• But you can change this trajectory!THE CONCORD COALITION