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Like many in the policy community, the Peterson Foundation is exploring how we can best support our nation’s recovery from the effects of this challenging crisis.
Undoubtedly, this pandemic requires a strong and sustained federal response, including substantial fiscal support. Congress and the administration have already enacted significant legislative packages, but there will surely be more to do in the weeks and months ahead.
The Peterson Foundation’s mission is to address our nation’s long-term fiscal challenges — but that is not the most pressing issue right now. We are adding significant debt today, but it’s out of necessity to protect against even more devastating damage to our health, economy and society. As we combat this virus as a nation, it’s critical that we reduce suffering, especially among vulnerable populations. We should design responses targeted to the unique characteristics of this pandemic, and spend smartly to maximize impact and effectiveness.
As we implement these measures, it’s also important to acknowledge that we were poorly prepared in many respects. This outbreak has not only exposed flaws in our pandemic preparedness, but also weaknesses in our healthcare infrastructure, challenges to our government’s ability to respond effectively, and newly revealed, but very familiar inequalities within our economy. And, of course, our unsustainable fiscal policy is another major concern that will hurt our capacity to respond to unexpected emergencies in the future. As we steward the nation for the next generation, we all share an important responsibility to make sure America is better prepared.
America entered this crisis with $23 trillion in national debt and trillion-dollar annual deficits growing as far as the eye can see. For a wealthy nation like ours, borrowing huge amounts in good times to fund consumption (rather than investment) makes no financial or economic sense. It places a lasting burden on the next generation that hinders their opportunities and leaves the nation in a weaker position to respond to the next crisis. Our kids and grandkids should not be handed the financial responsibility for this current crisis, on top of our past irresponsible borrowing. The next generation will have emergencies of its own, including, quite likely, increasingly frequent disasters caused by climate change. Handing them a vulnerable environment and massive debt is a double injustice.
Building a brighter future for the next generation has been the central principle behind the Foundation’s work since its inception. The high cost of this crisis will only make that challenge more urgent, as our underlying fiscal situation becomes even more dire. This pandemic will significantly harm both the numerator and denominator of our debt-to-GDP, as the national debt rises and the economy shrinks. Our public debt will reach 100% of GDP in about a year — we thought we had 10 years to reach that unfortunate milestone, yet it is now on our doorstep.
Let’s go full steam ahead to beat this virus once and for all. But when the current crisis is over, we must come to terms with our lack of national preparedness and our inability or unwillingness to plan for the future. Visionary, intentional budgeting will put us in a position of strength because it will identify top priorities and ways to pay for them. Adequately funding effective, responsible investments in our future will help us grow in a smart and sustainable way. America must remain a leading, financially strong country that leaves the next generation better off — and prepared for the unexpected.
Thank you for your interest in all of these issues at this critical moment. Now is the time to come together to improve our policy response, and build a stronger health, economic and fiscal foundation for the future.
Michael A. Peterson
Peter G. Peterson Foundation