The Congressional Budget Office said that the US economy could be USD 15.7 trillion smaller over the next decade than it otherwise would have been due to the adverse effects of the coronavirus on economic growth if Congress does not mitigate the damage.
The CBO, which had already issued a report forecasting a severe economic impact over the next two years, expanded that forecast to show that the severity of the economic shock could depress growth for far longer. The new estimate said that over the 2020-2030 period, total GDP output could be USD 15.7 trillion lower than CBO had been projecting as recently as January.
That would equal 5.3 per cent of lost GDP over the coming decade. After adjusting for inflation, CBO said the lost output would total USD 7.9 trillion, a loss of 3 per cent of inflation-adjusted GDP.
CBO called this a "significant markdown" in GDP output as a result of the pandemic. "Business closures and social distancing measures are expected to curtail consumer spending, while the recent drop in energy prices is projected to severely reduce US investment in the energy sector," CBO Director Philip Swagel said in a letter.
"Recent legislation will, in CBO's assessment, partially mitigate the deterioration in economic conditions," Swagel said in the letter to Senate Democratic Leader Chuck Schumer and Senator Bernie Sanders, I-Vt. The two had requested the information as a way to bring pressure on Republicans to follow the lead of the House and pass more economic relief.
"Last week we learned that over 40 million Americans lost their jobs as a result of this horrific pandemic," Schumer and Sanders said in a joint statement. "Today, the CBO tells us that if current trends continue, we will see a jaw-dropping USD 16 trillion reduction in economic growth over the next decade." Schumer and Sanders said Republicans should stop blocking legislation to provide more assistance given that 40 million workers have lost their jobs already due to the shutdowns that have sent the economy spiralling downward.
"In order to avoid the risk of another Great Depression, the Senate must act with a fierce sense of urgency," Schumer and Sanders said. The CBO is forecasting that the GDP, which shrank at a 5 per cent rate in the first three months of this year, will fall at a 37.7 per cent rate in the current April-June quarter, the biggest quarterly decline on record.