Crisis May Add $6 Trillion to Federal Debt
Chris Edwards
April 21, 2020
The COVID-19 pandemic has pushed the economy into a deep recession. The crisis will also create lasting economic damage from the jump in debt as a result of higher federal spending and lower federal revenues.
Treasury Secretary Mnuchin said recently that “interest rates are incredibly low, so there’s very little cost of borrowing this money.†That statement is not correct. Mnuchin seems to have forgotten about loan principal. Every dollar borrowed causes damage down the road from the resulting higher taxes extracted from the private sector. Furthermore, interest rates may spike, which will increase federal borrowing costs as accumulated debt is rolled over.
How much debt will the crisis add? Perhaps $6 trillion, based on the rough spending and revenue scenario shown in the chart below.
https://www.downsizinggovernment.org/crisis-may-add-6-trillion-federal-debt
