At the height of the Coronavirus pandemic, governments were desperate to rescue their nation from the depths of economic hell. Politicians grabbed a hammer and smashed the piggy bank into tiny pieces. But they found nothing except yarn and a button, seemingly because the rainy-day fund, collected when the sun was shining, had been plundered for extravagances and the cause du jour that mattered more than keeping the public purse solvent.
Since the Great Recession, governments worldwide have spent themselves into oblivion, damning the torpedoes full speed ahead to resuscitate the economy. With the coronacrisis blowing up the red ink-filled balance sheet, politicians’ pockets are empty, and they have resorted to deficit-financed spending to cushion the blow. This should serve as a lesson for leaders to keep their swampy hands off the rainy-day fund when it is sunshine and lollipops.
Ain’t No Sunshine
According to the Treasury Department, the U.S. budget deficit stands at $1.99 trillion so far in fiscal year 2020. This is a 267% increase from the same time a year ago. The substantial bump is due primarily to a record $684 billion in June, the sharpest month-to-month boost since April, when it surged $738 billion. The federal gap is poised to hit nearly $4 trillion, and this is without the administration's plans to introduce another stimulus package worth $1 trillion to $3 trillion.
Most of the red ink has been spilled into the Paycheck Protection Program and unemployment ...