The country’s gross domestic product will drop 12% in the current quarter, and federal government debt will top 100% of GDP for the first time since World War II, the Congressional Budget Office said in new preliminary estimates Friday.
The numbers show a shocking fiscal catastrophe from the coronavirus pademic, as Uncle Sam has borrowed massively to dole out trillions of dollars in tax cuts and new emergency spending.
GDP contracted by nearly 1% in the first three months of the year, CBO says, and will contract 11.8% this current quarter — but the economy should spring back quickly, surging more than 5% in the third quarter.
The jobs picture is less optimistic.
Unemployment, which is at about 14% right now, will rise to 16% in the third quarter of the year before dropping down to below 12% by the end of the year, CBO says. The rate was just 4% at the beginning of this year.
The numbers are unlike anything seen in modern financial and fiscal history.
The federal deficit, which before the virus had been projected at about $1 trillion this year, will now reach roughly $3.7 trillion — and that’s before Congress considers another tranche of spending that both President Trump and House Speaker Nancy Pelosi have said they want.
Powered by that red ink, federal debt held by the public will reach 101% of GDP at the end of this fiscal year, and will reach 108% at the end of 2021. It still at 79% last year.
