In response to the health and economic pressures induced by COVID-19, Congress, the Administration, and states approved unprecedented amounts of spending and lending authority. Congress passed the largest recovery package in its history, and total allowable aid tallied to over $4 trillion in federal loans, grants, unemployment insurance, and stimulus checks. The Federal Reserve employed unprecedented power to make $7.1 trillion available through emergency purchases and lending.19
The Treasury Department has borrowed at unprecedented levels to pay for the largest recovery package by Congress in history and set new monthly deficit records, with the fiscal year deficit totaling $3 trillion by the end of August.20 Credit rating firm Fitch Ratings downgraded the U.S. federal fiscal health outlook in July from stable to negative.21 Tens of billions in federal aid have already been lost in waste and abuse, and often proved difficult to access by those who most needed it. Waste, fraud, and abuse are features, not bugs, of big government programs offering “free money.”
Federal and state budgets must be in good shape to address, and hold up under the pressure of, this crisis and ones to come. Excessive government spending, while appearing to be helpful or compassionate in a time of crisis, is only taxation deferred at best. Congress and state governments must trim their budgets to focus on priorities in the wake of massive spending that has overextended already stretched budgets. Measures must be taken to stabilize government debt and walk back fiscal disruption caused be government pandemic responses in order to protect Americans from high taxes, high inflation, and austerity measures that could have been avoided with intentional planning. Policy barriers that discourage Americans from building up flexible savings that allow them to be resilient and generous when hardship strikes should also be removed.
Key Heritage Research:
- David Ditch, “Digging Out of the Hole: A Blueprint for a Responsible Post-COVID-19 Budget,” Heritage Foundation Special Report No. 238, December 1, 2020.
- Adam N. Michel, “The False Promise of Stimulus Spending: Lessons from the Great Recession,” Heritage Foundation Backgrounder No. 3493, May 6, 2020.
- Norbert J. Michel, “The Federal Reserve Should Not Help Congress Duck Its Responsibilities,” Heritage Foundation Commentary, March 25, 2020.
- Norbert J. Michel, “The Federal Reserve Should Not Help Congress Duck Its Responsibilities: Part 2,” Heritage Foundation Commentary, April 29, 2020.
- David Ditch and Joel Griffith, “Latest U.S. Credit Outlook Downgrade Should Be the Wake-Up Call Our Leaders Need,” Heritage Foundation Commentary, August 6, 2020.
- Romina Boccia, “America’s Dual Nightmare: Coronavirus and Massive Debt,” Heritage Foundation Commentary, March 25, 2020.
- Adam N. Michel, “The Promise of Fiscal Consolidation: How Cutting Spending Can Help to Return America to Prosperity,” Heritage Foundation Backgrounder No. 3528, September 9, 2020.
- Rachel Greszler and Adam N. Michel, “State Bankruptcy Is Irrelevant to COVID-19: And Bailouts Aren’t the Answer,” Heritage Foundation Commentary, June 29, 2020.
- Matthew D. Dickerson, “Congress Must Confront Overspending, CBO Report Confirms,” The Daily Signal, February 12, 2021.
Appendix of Heritage Research:
Matthew D. Dickerson, “Waiving PAYGO on $1.9T “Stimulus” Is Reckless. There Are Better Ways to Go.” The Daily Signal, March 15, 2021, https://www.heritage.org/budget-and-spending/commentary/waiving-paygo-19t-stimulus-reckless-there-are-better-ways-go.
Rachel Greszler, “How Congress Exacerbated the Union Pension Crisis Under the Guise of Coronavirus Relief,” Washington Times, March 12, 2021, https://www.heritage.org/jobs-and-labor/commentary/how-congress-exacerbated-the-union-pension-crisis-under-the-guise.
Matthew D. Dickerson, “Joe Biden’s Coronavirus Stimulus Bill: A $1.9 Trillion Disaster,” National Interest, March 11, 2021, https://www.heritage.org/budget-and-spending/commentary/joe-bidens-coronavirus-stimulus-bill-19-trillion-disaster.
Adam N. Michel, “Governors, Just Say No to Federal Bailouts,” The Daily Signal, March 11, 2021, https://www.heritage.org/budget-and-spending/commentary/governors-just-say-no-federal-bailouts.
Rachel Greszler, “What Taxpayers, Workers, and Retirees Need to Know About the Union Pension Bailout That Has Nothing to Do with COVID-19,” Heritage Foundation Issue Brief No. 6059, February 26, 2021, https://www.heritage.org/budget-and-spending/report/what-taxpayers-workers-and-retirees-need-know-about-the-union-pension.
Adam N. Michel, “Now Isn’t Time to Increase Taxes on Critical Investments,” The Daily Signal, February 17, 2021, https://www.heritage.org/taxes/commentary/now-isnt-time-increase-taxes-critical-investments.
Matthew D. Dickerson, “Congress Must Confront Overspending, CBO Report Confirms,” The Daily Signal, February 12, 2021, https://www.heritage.org/budget-and-spending/commentary/congress-must-confront-overspending-cbo-report-confirms.
David Ditch, “Schumer Is Wrong About Debt. Congress Must Take Debt Danger Seriously, Not Spend Recklessly.” The Daily Signal, February 2, 2021, https://www.heritage.org/debt/commentary/schumer-wrong-about-debt-congress-must-take-debt-danger-seriously-not-spend.
Adam N. Michel, “Why Infrastructure Spending Will Not Help the Pandemic Recovery,” Heritage Foundation Issue Brief No. 6043, January 25, 2021, https://www.heritage.org/budget-and-spending/report/why-infrastructure-spending-will-not-help-the-pandemic-recovery.
Adam Michel, “Congress Is Right Not to Pass Bailouts for States and Cities,” Daily Signal, December 23, 2020, https://www.heritage.org/budget-and-spending/commentary/congress-right-not-pass-bailouts-states-and-cities.
Matthew Dickerson and David Ditch, “9 Things You Need to Know About the $1.4 Trillion Fiscal Year 2021 Omnibus and $900 Billion COVID-19 Package,” December 22, 2020, Daily Signal, https://www.heritage.org/budget-and-spending/commentary/9-things-you-need-know-about-the-14-trillion-fiscal-year-2021.
Adam Michel, “How the Trump Tax Cuts of 2017 Will Make COVID-19 Economic Recovery Easier,” Daily Signal, December 21, 2020, https://www.heritage.org/taxes/commentary/how-the-trump-tax-cuts-2017-will-make-covid-19-economic-recovery-easier.
David Ditch, Lindsey Burke, Marie Fishpaw, Rachel Greszler, and Adam Michel, “Bipartisan Senate COVID-19 Package Should Do More to Combat COVID-19, Remove Wasteful Spending,” Heritage Foundation Backgrounder No. 3574, December 14, 2020, https://www.heritage.org/budget-and-spending/report/bipartisan-senate-covid-19-package-should-do-more-combat-covid-19-remove.
David Ditch, ed., “Digging Out of the Hole: A Blueprint for a Responsible Post-COVID-19 Budget,” Heritage Foundation Special Report No. 238, December 1, 2020, https://www.heritage.org/budget-and-spending/report/digging-out-the-hole-blueprint-responsible-post-covid-19-budget.
Adam Michel, “Post-COVID-19 Tax Policy: Keeping Taxes Low to Ensure a Robust Recovery,” Heritage Foundation Backgrounder No. 3549, October 30, 2020, https://www.heritage.org/taxes/report/post-covid-19-tax-policy-keeping-taxes-low-ensure-robust-recovery.
Adam N. Michel, “Bailouts Could Be More Than 35 Times State Revenue Losses,” The Washington Times, October 2, 2020, https://www.heritage.org/economic-and-property-rights/commentary/bailouts-could-be-more-35-times-state-revenue-losses.
Rachel Greszler, “COVID-19 Exposes Just How Badly Social Security Needs Reform,” September 28, 2020, https://www.heritage.org/social-security/commentary/covid-19-exposes-just-how-badly-social-security-needs-reform.
David Ditch, “6 Charts Show America’s Big Debt Problem,” The Daily Signal, September 28, 2020, https://www.heritage.org/debt/commentary/6-charts-show-americas-big-debt-problem.
Rachel Greszler, “Executive Order to Defer Social Security Taxes Unlikely to Affect Program Sustainability—But Social Security Reform Desperately Required, Payroll Tax Cut Possible,” Heritage Foundation Backgrounder No. 3530, September 11, 2020, https://www.heritage.org/budget-and-spending/report/executive-order-defer-social-security-taxes-unlikely-affect-program.
Adam N. Michel, “The Promise of Fiscal Consolidation: How Cutting Spending Can Help to Return America to Prosperity,” Heritage Foundation Backgrounder No. 3528, September 9, 2020, https://www.heritage.org/budget-and-spending/report/the-promise-fiscal-consolidation-how-cutting-spending-can-help-return.
David Ditch and Rachel Greszler, “New Report Shows Why Congress Must Address National Debt,” The Daily Signal, September 9, 2020, https://www.heritage.org/debt/commentary/new-report-shows-why-congress-must-address-national-debt.
David Ditch, “Latest Data Proves COVID-19 Doesn’t Justify Postal Bailout,” The Daily Signal, September 4, 2020, https://www.heritage.org/government-regulation/commentary/latest-data-proves-covid-19-doesnt-justify-postal-bailout.
Adam N. Michel, “Trump Considers a Cut in Capital Gains Tax,” The Daily Signal, August 17, 2020, https://www.heritage.org/taxes/commentary/trump-considers-cut-the-capital-gains-tax.
Joel Griffith and Adam N. Michel, “Payroll Tax Suspension Executive Order Is Legally Dubious, Economically Unnecessary,” Heritage Foundation Commentary, August 10, 2020, https://www.heritage.org/taxes/commentary/payroll-tax-suspension-executive-order-legally-dubious-economically-unnecessary.
David Ditch and Joel Griffith, “Latest U.S. Credit Outlook Downgrade Should Be the Wake-Up Call Our Leaders Need,” Heritage Foundation Commentary, August 6, 2020, https://www.heritage.org/debt/commentary/latest-us-credit-outlook-downgrade-should-be-the-wake-call-our-leaders-need.
Adam N. Michel, “Saving Our Economy: Are Taxpayers Getting Their Money’s Worth?” Heritage Foundation Commentary, August 5, 2020, https://www.heritage.org/budget-and-spending/commentary/saving-our-economy-are-taxpayers-getting-their-moneys-worth.
Adam N. Michel, “Why Stimulus Spending Never Works,” Heritage Foundation Commentary, July 13, 2020, https://www.heritage.org/budget-and-spending/commentary/why-stimulus-spending-never-works.
Rachel Greszler and Adam N. Michel, “State Bankruptcy Is Irrelevant to COVID-19: And Bailouts Aren’t the Answer,” Heritage Foundation Commentary, June 29, 2020, https://www.heritage.org/debt/commentary/state-bankruptcy-irrelevant-covid-19-and-bailouts-arent-the-answer.
Rachel Greszler, “Socializing State Budget Shortfalls Through Federal Bailouts Won’t Help: Here’s What Will,” Heritage Foundation Commentary, June 19, 2020, https://www.heritage.org/budget-and-spending/commentary/socializing-state-budget-shortfalls-through-federal-bailouts-wont.
David Ditch, “Prioritizing Federal Activity More Important in Wake of COVID-19,” Heritage Foundation Commentary, June 18, 2020, https://www.heritage.org/budget-and-spending/commentary/prioritizing-federal-activity-more-important-wake-covid-19.
David Ditch, “What Social Distancing? House Transportation Bill Would Pack Americans on Mass Transit,” The Daily Signal, June 15, 2020, https://www.dailysignal.com/2020/06/15/what-social-distancing-house-transportation-bill-would-pack-americans-on-mass-transit/.
Norbert J. Michel, “Fed Main Street Lending Program Already in Trouble, Likely to Get Worse,” Heritage Foundation Commentary, June 10, 2020, https://www.heritage.org/markets-and-finance/commentary/fed-main-street-lending-program-already-trouble-likely-get-worse.
Adam N. Michel, “USAs for All: All Americans Would Benefit From Personal Rainy Day Funds,” Heritage Foundation Commentary, June 8, 2020, https://www.heritage.org/taxes/commentary/usas-all-all-americans-would-benefit-personal-rainy-day-funds.
Rachel Greszler, “How States Can Address Their COVID-19 Budget Shortfalls Without Federal Bailouts,” Heritage Foundation Backgrounder No. 3499, June 8, 2020, https://www.heritage.org/budget-and-spending/report/how-states-can-address-their-covid-19-budget-shortfalls-without-federal.
David Ditch, “How the Feds Could End the Grave Mistake of ‘Stimulus’ Payments to the Deceased,” Heritage Foundation Commentary, May 21, 2020, https://www.heritage.org/budget-and-spending/commentary/how-the-feds-could-end-the-grave-mistake-stimulus-payments-the.
Adam N. Michel and David Ditch, “In Charts, How Big Blue States Outspend Red States,” Heritage Foundation Commentary, May 14, 2020, https://www.heritage.org/budget-and-spending/commentary/charts-how-big-blue-states-outspend-red-states.
Nicholas D. Loris, “Don’t Expand Federal Energy Loan Programs. Unplug Them,” Heritage Foundation Commentary, May 13, 2020, https://www.heritage.org/energy-economics/commentary/dont-expand-federal-energy-loan-programs-unplug-them.
Romina Boccia, David Ditch, James L. Gattuso, and Rachel Greszler, “Congress Should Free the Postal Service, Not Bail It Out,” Heritage Foundation Backgrounder No. 3495, May 8, 2020, https://www.heritage.org/budget-and-spending/report/congress-should-free-the-postal-service-not-bail-it-out.
Romina Boccia, “USPS Needs Major Reforms, Not a Bailout,” Heritage Foundation Commentary, May 7, 2020, https://www.heritage.org/budget-and-spending/commentary/usps-needs-major-reforms-not-bailout.
Adam N. Michel, “The False Promise of Stimulus Spending: Lessons from the Great Recession,” Heritage Foundation Backgrounder No. 3493, May 6, 2020, https://www.heritage.org/markets-and-finance/report/the-false-promise-stimulus-spending-lessons-the-great-recession.
Michel, “Why Full Business Expensing Is Vital for Post-COVID-19 Economic Recovery,” Heritage Foundation Commentary, April 30, 2020, https://www.heritage.org/taxes/commentary/why-full-business-expensing-vital-post-covid-19-economic-recovery.
Norbert J. Michel, “The Federal Reserve Should Not Help Congress Duck Its Responsibilities: Part 2,” Heritage Foundation Commentary, April 29, 2020, https://www.heritage.org/monetary-policy/commentary/the-federal-reserve-should-not-help-congress-duck-its-responsibilities-2.
Romina Boccia and Justin Bogie, “This Is How Big the COVID-19 CARES Act Relief Bill Is,” Heritage Foundation Commentary, April 20, 2020, https://www.heritage.org/budget-and-spending/commentary/how-big-the-covid-19-cares-act-relief-bill.
Rachel Greszler, “3 Reasons Why States Shouldn’t Get a Congressional Bailout,” Heritage Foundation Commentary, April 20, 2020, https://www.heritage.org/taxes/commentary/3-reasons-why-states-shouldnt-get-congressional-bailout.
Adam N. Michel, “State Bailouts Create Poor Incentives, Do Not Fix Underlying Problems,” Heritage Foundation Backgrounder No. 3488, April 17, 2020, https://www.heritage.org/budget-and-spending/report/state-bailouts-create-poor-incentives-do-not-fix-underlying-problems.
Gattuso, “Lawmakers Need to Reform Postal Service, Not Provide Massive Bailout,” Heritage Foundation Commentary, April 14, 2020, https://www.heritage.org/budget-and-spending/commentary/lawmakers-need-reform-postal-service-not-provide-massive-bailout.
Adam N. Michel, “Sending More Money to States Could Make Their Budget Problems Worse,” Heritage Foundation Commentary, April 13, 2020, https://www.heritage.org/budget-and-spending/commentary/sending-more-money-states-could-make-their-budget-problems-worse.
David Ditch and James L. Gattuso, “Congress, Not Coronavirus, Deserves Blame for Postal Service Woes,” Heritage Foundation Commentary, March 27, 2020, https://www.heritage.org/budget-and-spending/commentary/congress-not-coronavirus-deserves-blame-postal-service-woes.
Norbert J. Michel, “The Federal Reserve Should Not Help Congress Duck Its Responsibilities,” Heritage Foundation Commentary, March 25, 2020, https://www.heritage.org/monetary-policy/commentary/the-federal-reserve-should-not-help-congress-duck-its-responsibilities.
Romina Boccia, “America’s Dual Nightmare: Coronavirus and Massive Debt,” Heritage Foundation Commentary, March 25, 2020, https://www.heritage.org/debt/commentary/americas-dual-nightmare-coronavirus-and-massive-debt.
Nicholas D. Loris, “Energy Bailouts and Handouts Don’t Belong in Coronavirus Packages,” Heritage Foundation Commentary, March 23, 2020, https://www.heritage.org/energy-economics/commentary/energy-bailouts-and-handouts-dont-belong-coronavirus-packages.
David Ditch, “Coronavirus Aid for Travel Industry: Prepayments, Tax Relief, Not Bailouts,” Heritage Foundation Commentary, March 20, 2020, https://www.heritage.org/budget-and-spending/commentary/coronavirus-aid-travel-industry-prepayments-tax-relief-not-bailouts.
Norbert J. Michel, “To Combat Recession, the Fed Should Stop Paying Interest on Bank Reserves…Now,” Heritage Foundation Commentary, March 19, 2020, https://www.heritage.org/monetary-policy/commentary/combat-recession-the-fed-should-stop-paying-interest-bank-reservesnow.
Adam N. Michel, “One Small Change in the Tax Code Could Help Many Businesses in Uncertain Time,” Heritage Foundation Commentary, March 18, 2020, https://www.heritage.org/taxes/commentary/one-small-change-the-tax-code-could-help-many-businesses-uncertain-time.
Rachel Greszler and Adam N. Michel, “How Congress Can Help Retirees Amid Market Turmoil,” Heritage Foundation Commentary, March 13, 2020, https://www.heritage.org/markets-and-finance/commentary/how-congress-can-help-retirees-amid-market-turmoil.
Adam N. Michel, “Without These Protections, States Will Tax Small Businesses to Death,” Heritage Foundation Commentary, March 5, 2020, https://www.heritage.org/taxes/commentary/without-these-protections-states-will-tax-small-businesses-death.
ENDNOTES:
19. Committee for a Responsible Federal Budget, COVID Money Tracker, updated October 5, 2020, https://beta.covidmoneytracker.org/explore-data/interactive-table (accessed October 6, 2020).
20. U.S. Department of the Treasury, Bureau of Fiscal Service, “Monthly Treasury Statement: Receipts and Outlays of the United States Government For Fiscal Year 2020 Through August 31, 2020, and Other Periods,” https://www.fiscal.treasury.gov/files/reports-statements/mts/mts0820.pdf (accessed October 6, 2020).
21. Fitch Ratings, “Fitch Revises United States’ Outlook to Negative; Affirms at ‘AAA,’” July 31, 2020, https://www.fitchratings.com/research/sovereigns/fitch-revises-united-states-outlook-to-negative-affirms-at-aaa-31-07-2020 (accessed August 10, 2020).
