Just a few months ago 2020 was looking like it would be a $1.1T deficit year…revenues were up a curious amount…but so were costs.
23 days into April that has changed as we have already topped $1T on the way to what could be a $3T+ Deficit for 2020…here’s what it looks like.
$612B just in April so far. Obviously…this is getting nasty, but that’s not a surprise…this much is already baked in…. The key question in my mind…the critical variable is the medium term affect on the tax base. If this shutdown ends, and by say the end of the year economic activity is back within 10% or where we were…the charade can probably keep going on….not as long as before, but the show will go on. However…if this results in a more or less permanent 25-40% cut in economic activity that carries on into 2021+…it will be extremely hard to keep pretending this debt can be repaid.
Curiously…just yesterday Mitch McConnell suggested States having trouble with their finances should declare bankruptcy. Really!! I mean he’s right…and not just about the States…just interesting to hear it said out loud. The truth is…that those foolish enough to lend money to the states and the US government should lose ALL of their money…. and someday they will. Nobody knows when…but it will happen.
