On the latest Facing the Future, I was joined by Marc Goldwein, Senior Vice President and Senior Policy Director for the Committee for a Responsible Budget (CRFB), and Phil Sletten, Senior Policy Analyst for the New Hampshire Fiscal Policy Institute (NHFPI). We discussed how the national debt, federal budget deficits, Social Security and the state of New Hampshire are impacted by the COVID-19 pandemic.
[Note: In light of current circumstances, The Concord Coalition is posting additional online content. Portions of this week's Facing the Future can be seen in the video clips posted below.]
Goldwein kicked off the program by making clear that CRFB does not always advocate for lower budget deficits, but in general, it pushes for fiscal sustainability.
“Part of the reason that we don’t want to borrow too much in good times is so that we can borrow as a country when we absolutely need to,” Goldwein said. “It’s smart to borrow during recessions to support the economy; it’s smart to borrow during emergencies to spread out the cost; and right now we are facing both.”
He emphasized that amidst this health crisis, the responsible thing to do is borrow, but it is not responsible to borrow infinite amounts without oversight.
“Before there was any crisis, we were projected to have over a $1 trillion deficit this year,” Goldwein said. “Congress has acted with $2.5 trillion roughly of legislation to try to support the economy.” The risk in our government’s response to this crisis, however, is putting in place permanent policies that make the nation’s structural budget deficit even worse.
CRFB’s analysis projects a $3.8 trillion budget deficit for this fiscal year, which would be the largest in U.S. history, and help push the national debt beyond the size of the economy.
“Hopefully, this once-in-100-year event is a once-in-100-year event, and so it actually makes sense to spread out its cost,” Goldwein said.
You can read more of CRFB’s analysis and explore its new “COVID Money Tracker,” here.
When the conversation switched gears to the recent Social Security and Medicare Trustees’ report, Goldwein said, “I’m going to give you the bad news, and then I’m going to give you the worse news.”
“The bad news is, the major trust funds are all within fifteen years of insolvency,” he said. “That means that somebody retiring today at the age of 62 will be 77 when they face a 21 percent, across the board, benefit cut.”
“The worse news is that the trustees’ projections did not account for any of the effects of the current economic crisis,” Goldwein said. Those effects will likely accelerate the insolvency dates of the various trust funds within Social Security and Medicare by several years.
“The only possible change that could save Social Security, without policy change, is time travel,” Goldwein exclaimed.
Sletten provided insight into how New Hampshire is being impacted by the pandemic, including federal funding limitations.
“Funding from the Coronavirus Relief Fund was set up at the federal level, and that provided New Hampshire specifically with $1.25 billion in aid,” Sletten said. “Last week, the U.S. Treasury Department published more detailed guidance on how those dollars can be used.”
Sletten said the guidance provided relatively broad latitude for COVID-19 related costs, which included increased medical expenses and economic costs.
“However, the funds can’t be used to offset state revenue losses due to that economic impact,” he said. “With the revenue shortfalls that we have been seeing, and are likely to see going forward, not being able to use those Coronavirus relief funds to offset state revenue losses has big implications.”
He added that relief funds cannot be used to fund the state portion of the Medicaid match.
New Hampshire’s rainy-day fund and unemployment compensation trust fund were doing relatively well ahead of the crisis, but some multi-state analyses suggest that New Hampshire was not in a particularly good position relative to other states, when considering certain stress-test factors, Sletten said.
Based on those same multi-state projections, the state is looking at a revenue shortfall in the hundreds of millions of dollars. Sletten said, “It’s not clear what the first digit of those several hundred million will be, but in a state with a roughly $6 billion-a-year annual budget, that has a big impact on lots of programs.”
He suggested factoring the state’s long, slow recovery from the Great Recession into public policy discussions on economic relief and the recovery going forward.
“New Hampshire should prepare to invest in itself to try and avoid some of the effects we saw in the last recession,” Sletten said. “Of course, this recession is very different, so it’s hard to say exactly what will happen now versus before.”
You can read more analysis from NHFPI, here.
Hear more on Facing the Future. I host the program each week on WKXL, NHTalkRadio.com (N.H.), and it is also available via podcast. Join me and my guests as we discuss issues relating to national fiscal policy with budget experts, industry leaders and elected officials. Past broadcasts are available here. You can subscribe to the podcast on Spotify, iTunes, Google Play Music or with an RSS feed. Follow Facing the Future on Facebook and watch videos from past episodes on our YouTube playlist.