Debt Statistics in the US During the Pandemic

The COVID-19 pandemic caused a public health and financial crisis. Since the global pandemic started, the federal government has already passed legislation to provide aid to businesses and individuals affected by COVID-19. 

To finance these legislation packages, the government opted to borrow. Aside from the debt of the government, individuals also were inclined to apply for a loan. Below are additional details about the debt statistics in the US during the pandemic. 

Effect of COVID-19 Economically

Many countries around the world went into lockdown when the pandemic broke out. This means the closing of businesses, skeletal functioning of both private and government offices, and mass lay-off of employees because businesses can no longer sustain them during the pandemic. 

The COVID-19 became the vehicle to one of the worst recessions ever. There is also no guarantee when this recession will end. Although there is hope with the introduction of COVID-19 vaccines, economists still see a slow rollout of these vaccines to developing economies and could hamper activities like those before the pandemic happened. 

With travel restrictions still in place, countries are crippled in terms of tourism. One of the main features applied during the pandemic is the partial or complete closure of borders, forcing accommodations, restaurants, travel agencies, and other service-oriented businesses to close down. 

Since businesses are closing, there is also a high level of layoffs. Small businesses had a hard time keeping their staff and providing payroll after their revenues declined. Due to this, the US government passed several legislations to give aid in expanding unemployment insurance,  new spending and giving cash to low and middle-income Americans. 

One of these legislations is the Coronavirus Preparedness and Response Supplemental Appropriations Act, which provided $8.3 billion as an initial response to the pandemic for research, testing, and medical supply procurement. 

Another legislation is the Families First Coronavirus Response Act, which provided tax credits, paid sick leave, free COVID-19 testing, enhanced sick leave benefits, food assistance, and additional medical funding. 

The Coronavirus Aid, Relief and Economic Security (CARES) Act is a more comprehensive response to the pandemic. It provides support to public health, state and local governments, the economy, businesses, and individuals. It allowed around $2 Trillion appropriations. 

Lastly, the Paycheck Protection Program and Health Care Enhancement Act provided a special funding program for the public health response. The same law appropriated $484 Billion for programs under the CARES Act.

What the Pandemic Means to the Government Debt

Among the collateral damages of this pandemic is on the federal budget and US economy. With all the legislation enacted by the different governments to give aid to those affected, it will surely need funding through debt. Developed countries have easier access to capital markets and have more resources. However, emerging-market countries have fewer resources.

One of the countries that are suffering from big debt is the US government. Since the pandemic, the USA’s national debt is growing faster than the GDP. As of April 2020, the GDP was surpassed by the debt by almost 18%. The national debt at that time was $27 Trillion, while the GDP was only at $19.5 Trillion. 

Such debt is set to increase due to the economic effects of the pandemic and the measures done by the government to give aid to those affected. Furthermore, this economic recession is increased due to a reduction of tax revenue and an increase in aid. It is said to rise by 117% by year 2025 if there is no significant recovery.

Private Debt 

The pandemic has a similar effect between businesses and individuals. Both resort to loans with varying interest rates. As of January 2021, 70% of adults have personal debt. Of this, 39% have credit card loans, 25% with mortgages, 16% with student loans, and 23% with car loans. 

Almost 51% of Americans have increased credit card debts due to the pandemic. Take note that credit cards are the most expensive way to borrow money. However, some are fortunate to have a decline in their credit card debt. Unemployment insurance and a decline in consumer spending due to the lockdown helped in lessening credit card debt to others.

There is an increase in mortgage balances from $85 billion to $9.86 trillion because of home purchases and refinancing. On the other hand, those with student loans with delinquency drop because of the forbearance programs offered to them. However, auto or car loans continue to have delinquency because forbearance varies from each lender.

Final Thoughts

The COVID-19 pandemic has affected not only the USA but the whole world. Aside from the damages to the health and safety of the people, their economic status is also affected. Debts became the resort of business, individuals, and the government. The government enacted laws to help those affected, which in turn increased the debt of the nation.