The corona virus pandemic has been, and will be, very costly tofederal, state, and local governments as well as to businesses andto consumers. According to the Congressional Budget Office(2020):
CBO expects that the economy will contract sharply during thesecond quarter of 2020 as a result of the continued disruption ofcommerce stemming from the spread of the novel coronavirus. Thefollowing are CBO’s very preliminary estimates, which are based oninformation about the economy that was available through thismorning and which include the effects of an economic boost fromrecently enacted legislation.
- Gross domestic product is expected to declineby more than 7 percent during the second quarter. If that happened,the decline in the annualized growth rate reported by theBureau of Economic Analysis would be about four times larger andwould exceed 28 percent. Those declines could be much larger,however.
- The unemployment rate is expected to exceed 10percent during the second quarter, in part reflecting the 3.3million new unemployment insurance claims reported on March 26 andthe 6.6 million new claims reported this morning. (The number ofnew claims was about 10 times larger this morning than it had beenin any single week during the recession from 2007 to 2009.)
- Interest rates on 10-year Treasury notes areexpected to be below 1 percent during the second quarter as aresult of the Federal Reserve’s actions and market conditions.(Swagel, 2020, para. 1)
How will the decline in GDP and the rise in unemployment, andlow interest rates affect federal, state, and localgovernments?
