Bad Medicine? Federal Debt and Deficits after COVID-19
In January 2020, the Congressional Budget Office (CBO) projected that the federal budget deficit (a negative surplus) would total $1.015 trillion in fiscal year (FY) 2020 and $1 trillion in FY 2021.1 Those projections are now obsolete because of the many actions taken by government officials to fight the COVID-19 pandemic. These actions, while designed to prevent a health crisis of an unknown magnitude and duration, have nonetheless helped trigger massive job losses and the shuttering of businesses. A deep recession is likely. The deep recession will further increase the size of the federal budget deficit since lower economic activity will reduce tax revenues and automatically increase certain types of federal expenditures (e.g., unemployment benefits).
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