A Note from Maya MacGuineas
March 24, 2020
I wanted to reach out as we are all struggling to figure out how best to respond during this terrible crisis.
For the past four decades, the Committee for a Responsible Federal Budget has been urging our elected officials to reduce deficits and address the country’s high and rising national debt. One key reason we have continued to push for debt reduction in good times is so the country will have the fiscal space to engage in needed borrowing during recessions or national emergencies. The country is now facing both.
The current crisis is in many ways unprecedented, and Washington entered it unprepared. Instead of spending the last five years addressing the nation’s long-term fiscal imbalance, policymakers enacted a series of tax cuts and spending increases that doubled our budget deficits. We entered this crisis facing permanent trillion-dollar deficits and with the debt-to-GDP ratio already headed to record levels. As a result of this crisis, deficits could easily exceed $2 trillion this year and next.
However, now is not the time to worry about near-term deficits. Combating this public health crisis and preventing the economy from falling into a depression will require a tremendous amount of resources – and if ever there were a time to borrow those resources from the future, it is now. Larger deficits are not only an inevitability, but are, unfortunately, a necessity.
Yet that doesn’t mean resources are limitless nor that all ideas to spend more money or cut taxes are wise. Dollars should be injected into the economy quickly, but they should be spent as efficiently and effectively as possible. That means investing first and foremost in measures to address the public health crisis, targeting money toward those individuals and businesses most affected, means testing where it doesn’t compromise timeliness, relying on loans and timing changes when it makes sense, and listening to the advice of economists on what policies will best support the economy.
As we warned earlier this week, now is not the time for politicians to push their pet projects. New deficit spending should be credibly temporary and focused on the crisis at hand – we must not waste precious dollars on permanent policy changes that have nothing to do with the current crisis.
We hope any final deal to rescue the economy will recognize the severity of the current crisis and the need for real leadership, not political posturing.
Understanding that an already high federal debt will grow massively over the next few years, we should also be ready to turn back to the issue of deficit reduction once this crisis has passed. Ideally, deficit-financed measures today would be coupled with reforms to help reduce structural deficits tomorrow. We wasted the last five years adding to deficits when we should have been reducing them; we can’t afford to make the same mistake in advance of the next major national challenge. As time is of the essence, the long-term debt should not be viewed as an immediate priority, but it remains an important one.
The Committee for a Responsible Federal Budget has closed its physical offices but will remain open through work-from-home arrangements throughout this crisis. We are continuing to work with policymakers, the press, and the public to help identify solutions and provide needed analysis. We are also exploring new forms of communication to keep the public informed on these vital issues. As always, we welcome any thoughts or input at email@example.com.
Please stay safe.