The Congressional Budget Office is a non-partisan group that analyzes the effects of federal legislation and that projects economic activity and government spending. It recently issued an analysis of the effect of the extreme business shutdowns in response to the coronavirus epidemic. (CBO Analysis) The analysis is focused on the near-term–the current year and 2021. Real gross domestic product is expected to decline by 12% during the second quarter, which is an annualized rate of 40%!! The unemployment rate is projected to average 14% in the second quarter. Currently, without any more spending to compensate for shutdowns that never should have been ordered, the federal budget deficit is expected to be $3.7 trillion for fiscal 2020. The agency does expect growth to rebound at about 17% for the second half of 2020, led by consumer spending, but that assumes the shutdowns are removed.
But for 2021, real (inflation-adjusted) GDP growth is expected to be only 2.8%. And it projects that unemployment will remain above 10% for all of 2021, not declining below that til the end of that year. That is an enormous drain on state and federal resources. That rate would be even worse except that CBO says 8 million people will just give up trying to work. Among other things that is a lot of lost tax revenue. While CBO doesn’t comment on it in this analysis, the agency has been warning for years about the negative effects of large federal deficits and ballooning total federal debt. Those impacts are about to get a lot worse.