The Washington PostDemocracy Dies in Darkness

Coronavirus fallout will haunt U.S. economy for years, costing it $8 trillion through 2030, CBO says

Drop in consumer spending and revenue will dampen growth for years, government office says.

June 1, 2020 at 3:50 p.m. EDT
A business in San Antonio is closed because of the coronavirus. (Eric Gay/AP)

Fallout from the coronavirus pandemic will shrink the size of the U.S. economy by roughly $8 trillion over the next decade, according to new projections released by the Congressional Budget Office on Monday.

In a letter to U.S. lawmakers, the CBO said the U.S. economy will grow by $7.9 trillion less from 2020 to 2030 than it had projected in January. That amounts to a 3 percent decline in U.S. gross domestic product compared to its initial estimate.

The stark illustration of the pandemic’s potential economic impact comes one week after White House officials confirmed they would not release their own updated projections this summer in their annual “mid-session” budget review.

The pandemic will hamper U.S. economic growth by reducing the amount of consumer spending and closing numerous businesses, the CBO said. Part of the impact will be mitigated by the more than $2 trillion the federal government has already approved in emergency spending for households and businesses.

“Business closures and social distancing measures are expected to curtail consumer spending, while the recent drop in energy prices is projected to severely reduce U.S. investment in the energy sector,” said Phillip L. Swagel, the CBO director and former economic expert at the American Enterprise Institute, a center-right think tank.

The pandemic’s impact on the U.S. economy has been swift. The unemployment rate jumped from 3.5 percent in February to 14.7 percent in April. Tax revenue plummeted, spending skyrocketed, and the economy quickly contracted after years of growth.

The CBO report was requested by Senate Minority Leader Charles E. Schumer (D-N.Y.) and Sen. Bernie Sanders (I-Vt.), who serves on the Senate Budget Committee. The CBO had previously released forecasts for 2020 and 2021.

“Slower growth means higher unemployment, lower wages, and less income for people. What we are looking at is another decade of that,” said Adam Ozimek, chief economist at Upwork.

There’s a growing possibility of a W-shaped economic recovery — and it’s scary

Breaking precedent, White House won’t release formal economic projections this summer that would forecast extent of downturn

The White House said last week it would not be releasing its updated economic projections, such as GDP and unemployment statistics, because of the high level of volatility in the U.S. economy. CBO and other economic analysts have been able to do so.

The CBO’s letter says while “real” GDP will fall by about $8 trillion, “nominal” GDP will fall by $16 trillion over the next 10 years. That measure is viewed by economists as less significant because it does not include the impact of inflation.

Lawmakers are debating whether to renew several federal aid programs set to expire, including a sizable increase in unemployment benefits that will lapse at the end of July. Congressional Democrats seized on the CBO’s findings to argue additional emergency aid is urgently needed.

“In order 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,” Schumer in a statement. “The American people cannot afford to wait another month for the Senate to pass legislation. They need our help now.”

Coronavirus: What you need to know

Covid isolation guidelines: Americans who test positive for the coronavirus no longer need to routinely stay home from work and school for five days under new guidance planned by the Centers for Disease Control and Prevention. The change has raised concerns among medically vulnerable people.

New coronavirus variant: The United States is in the throes of another covid-19 uptick and coronavirus samples detected in wastewater suggests infections could be as rampant as they were last winter. JN.1, the new dominant variant, appears to be especially adept at infecting those who have been vaccinated or previously infected. Here’s how this covid surge compares with earlier spikes.

Latest coronavirus booster: The CDC recommends that anyone 6 months or older gets an updated coronavirus shot, but the vaccine rollout has seen some hiccups, especially for children. Here’s what you need to know about the latest coronavirus vaccines, including when you should get it.