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.
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.
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