The United States economy is set to lose nearly $8 trillion over the next decade due to the coronavirus pandemic. An estimate from the Congressional Budget Office (CBO) released yesterday, 2 June, shows that all the rescue funding will not be able to counter a $7.9 trillion loss in economic activity through fiscal 2030.
The figure translates to 3% of real economic output or nominal GDP adjusted for inflation. Without adjusting for inflation, the projected damage to the economy would amount to $16 trillion over the next 10 years.
The agency’s official tally of the pandemic’s economic damage reflects expectations of dampened consumer spending and diminished business investment. Weaker inflation is largely seen as the major reason for the decrease in output. There is an expectation for energy and transportation prices to increase more slowly as Americans remain hesitant to travel.
“Business closures and social distancing measures are expected to curtain consumer spending, while the recent drop in energy prices is projected to severely reduce US investment in the energy sector. Recent legislation will, in CBO’s assessment, partially mitigate the deterioration in economic conditions,” CBO Director Phillip L. Swagel wrote in response to an enquiry from Senator Chuck Schumer.
Congress recently passed the $2.2 trillion CARES Act meant to cushion the economic blow of the pandemic. Deliberations are ongoing for another measure that could be as much as $3 trillion.
For Schumer, the estimates highlight the need to pass another spending bill. “To avoid the risk of another Great Depression, the Senate must act with a fierce sense of urgency to make sure that everyone in America has the income they need to feed their families and put a roof over their heads,” he said in a statement.
Swagel also said that there is “an unusually high degree of uncertainty” surrounding the projections, owing to unknown factors over how the pandemic will unfold and how future relief measures as well as social distancing could influence the situation.