Congress is rushing to pass at least $1 trillion more in coronavirus rescue spending, pushing this year’s federal deficit toward a historic $4 trillion and dividing Republicans over the government’s ability to spend its way out of the crisis.
Senate GOP leaders were still finalizing the proposals, but some in the party already say they will vote against the package because of the high price tag.
Economists, too, warn against the rushed — and enormous — spending.
“When you increase government spending, you always have waste, fraud and abuse. And ramping up government spending in the way they are doing it now in such a massive expenditure coming so fast … you are just inviting theft, waste, fraud, abuse — everything under the sun. It can’t be controlled,” said Steve Hanke, a professor in applied economics at the Johns Hopkins University who served as a senior economist on President Ronald Reagan’s Council of Economic Advisers.
Last month, the federal government spent $1.1 trillion, shattering the record for the highest monthly spending in U.S. history, and the deficit soared to $2.7 trillion so far this fiscal year, according to the Treasury Department.
Before this year, the highest monthly total was $439.8 billion spent last May.
The spending in the last three months, mostly driven by the response to the coronavirus crisis, was more than the government spent in an entire year as recently as 2006.
The Trump administration began the year predicting a deficit of about $1 trillion. It’s now nearly three times that level, with more than two months left in the fiscal year, which ends Sept. 30.
Republicans are preparing this week to release a new coronavirus rescue package that spends heavily on children, jobs and health care. The bill could exceed $1 trillion.
Republican leaders want to get a coronavirus relief package passed by the end of the month. House Democrats, though, have suggested the price tag of the fourth installment of coronavirus relief should be about $3 trillion.
Both chambers are scheduled to take their August recess, with the House scheduled to leave at the end of the month and the Senate staying around until Aug. 7. House Democratic leaders, though, promised to stay until a bill gets passed.
Rep. Ken Buck, Colorado Republican, said the pain of dealing with the high deficit down the road will be “incredible,” noting he voted against previous COVID-19 bills because Americans won’t put up with the high taxation likely needed to pay the debt in the future.
“We aren’t having a serious discussion about how we pay this money back, and we got to have that discussion before people will have a sense that we are acting responsibly,” Mr. Buck said.
It will take increased taxes, borrowing or printing more money — possibly all three — to finance the high deficits, economists warned.
“There is no such thing as a free lunch and you can either do it tax and you’re crowding out private consumption, squeezing out the private sector — or you can borrow, but eventually, that starts squeezing out the private investment,” Mr. Hanke said.
Printing money would fuel inflation, and eventually, the low interest rates Americans are enjoying right now can’t be sustained.
“When you get more inflation, interest rates go up,” he said.
But David Wessel, director of the Hutchins Center on Fiscal & Monetary Policy at the left-leaning Brookings Institution, said the current low interest rates make deficit spending relatively painless.
“The urgent priority is fighting the coronavirus and shoring up the economy until the virus recedes. And with interest rates very, very low and the cost of borrowing is very, very low. So borrowing a lot makes sense,” he said.
Sen. Marco Rubio, Florida Republican, said in normal times, he wouldn’t support the big spending. But the pandemic is more like war time, he reasoned.
“The problem we have right now is if we don’t do it, the structural damage of what it would do to our economy will make it nearly impossible for a decade to generate the growth we are going to need to bring the debt under control,” he said.
Still, defections are expected within the GOP ranks.
Sen. Rand Paul, Kentucky Republican, is against spending $1 trillion on the package.
“It disappointed me that conservatives who were always complaining about President Obama’s debt and spending now seem to have lost their moorings — have lost what they believe in and now are advocating spending like drunken sailors, like the Democrats always did, so it to me is a terrible situation,” he told The Washington Times. “I am going to keep fighting against it.”
Conservatives have long warned about the government’s mounting debt, with the national debt topping $26.5 trillion. But those warning wane during crises and often during Republican administrations.
Eventually, increasing deficits likely will result in inflation, higher interest rates and increased taxes.
“There is one thing Democrats and Republicans agree on: Greater spending,” said Ernie Goss, an economics and finance professor at Creighton University. “Until these politicians see negative impacts from their spending, they will continue to overspend.”
Senate Minority Leader Charles E. Schumer jabbed Republicans for being stingy in the face of a national emergency.
“A few of my friends on the other side hardly want to spend any more money to help our country in this once-in-a-generation crisis because it might add to the national debt. Giant corporate tax cuts — $1.5 trillion to $2 trillion of them — that’s OK, but fighting the greatest public health crisis in a century and forestalling a depression — that’s a bridge too far?” the New York Democrat said.
There’s frustration among Republicans with not only bailing out Democrat-led states such as New York, New Jersey and Illinois but also the extra $600 a week in unemployment benefits from the previous COVID-19 relief funds.
They said the $600 is too much and is keeping some people from returning to work because they are making more while unemployed.
However, Mr. Rubio said a balance needs to be struck because some employees have no industry to go back to — such as in south Florida, which had to largely shut down again after a spike in more coronavirus cases this month.
“My view continues to be the overwhelming majority of Americans would prefer to have a job than a three-month benefit, but we want to balance what we are hearing from both sides on that,” he said.
• Alex Swoyer can be reached at aswoyer@washingtontimes.com.
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