The unemployment rate will shoot to 14% this quarter, the Congressional Budget Office said Thursday in its first preliminary estimates of the coronavirus crisis, and will still be 10% through the end of 2021.
That would shatter the previous post-World War II war record of 10.8% unemployment in 1982.
CBO also pegged the cost of last month’s massive COVID-19 stimulus law at $1.8 trillion over the next decade, with most of that coming in new spending.
The estimates came in the official scorekeeper’s first look at the Coronavirus Aid, Relief and Economic Security (CARES) Act, which Congress and President Trump agreed to as an initial downpayment to try to prevent a complete collapse of the economy.
The law tries to keep employees on businesses’ payroll, offers additional support for those who do lose jobs, and contains money to help health officials grapple with the deadly disease.
But early indications are that job losses are catastrophic, with nearly 6 million initial jobless claims lodged this week, following two previous weeks of similar numbers.
CBO said its estimates are preliminary and don’t account for the effects of the CARES Act, but without those, “the unemployment rate reaches 14 percent in the second quarter of calendar year 2020 and is still 10 percent at the end of calendar year 2021.”
During the Great Recession official unemployment never topped 10%.
Congress has approved massive amounts of spending, borrowing heavily to try to prevent a deeper collapse.
The CARES Act includes nearly $1 trillion in new entitlement outlays, another $326 billion is in discretionary spending and there’s $446 billion in revenue cuts.
The Treasury Department is also authorized to issue up to $454 billion in emergency lending, but the CBO says when those are paid off, it will end up a wash for the federal budget, so the cost to the government over the 10-year budget window will be about $1.8 trillion.
Most of the spending and tax cuts are front-loaded, with $1.6 trillion going out in 2020. Another $450 billion will be spent in 2021, with some of that being recouped in the following two years, the CBO said.
President Trump has called the CARES Act the largest single bill ever to clear Congress.
It comes as the government was already facing a $1 trillion deficit this year, and will only deepen that hole.
• Stephen Dinan can be reached at sdinan@washingtontimes.com.
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