Mar 20, 2020 - Politics & Policy

The coronavirus stimulus' unknown cost

Illustration: Sarah Grillo/Axios

Despite what you've heard from congressional Republicans over the last decade, there's no limit to how much the government can spend — and that'll become evident as the federal government prepares its "phase three" coronavirus stimulus package.

Why it matters: U.S. government spending is about to skyrocket, with checks going out to individuals, loans being handed to companies and other attempts to stanch the coming economic pain.

How it works: When Congress passes a spending bill, Treasury borrows all of the necessary funds by issuing Treasury bonds.

  • There is no debt ceiling at the moment — it was suspended in last year's budget deal — so Treasury can issue as many new bonds as it wants.
  • Because the U.S. government is considered the safest borrower in the world, there is always ample demand for Treasury bonds.
  • The bonds are sold to banks, and if the banks don't have enough money to buy them, the Federal Reserve will lend them as much as they need. The banks then turn around and sell the bonds, at a small profit, to investors from around the world.

The big picture: The stimulus' impact on the national debt isn't a big worry on Capitol Hill, several Democratic and Republican aides tell Axios. 

  • "Folks aren't super concerned about debt right now — they just want to act. … And we normally would be [concerned], but this is uncharted territory,” one Senate GOP aide said.
  • "We’re going to borrow and the debt will go up,” another GOP aide said, adding that there haven’t been many discussions about the longer-term economic impact. "The truth is that we need to spend money to help people right now."

Worth noting: The nonpartisan Congressional Budget Office has not scored either the "phase two" plan or "phase three" proposal, so their ultimate cost to the government is still unknown.

Go deeper

Public wants federal government, not states, in charge on coronavirus

Data: KFF Health Tracking Poll, March 25-30, 2020; Chart: Axios Visuals

President Trump has repeatedly said that he sees the federal government’s role as “backup” to the states on the response to coronavirus. But Americans want the federal government — not states — to take the lead, according to our latest KFF tracking poll.

Why it matters: States have so far been the ones issuing specific directives about social distancing, and are also trying to source health care supplies.

Go deeperArrowApr 7, 2020 - Health

Senate looks to increase coronavirus relief for small businesses this week

Photo: Erin Schaff-Pool/Getty Images

Senate Majority Leader Mitch McConnell announced Tuesday he will be working with Minority Leader Chuck Schumer and Treasury Secretary Steven Mnuchin to increase funding for the Payroll Protection Program, the federal backstop to help small businesses maintain operations and keep workers employed amid the coronavirus outbreak.

Why it matters: The $350 billion lending program — which opened for business last Friday — has had a highly problematic rollout, with banks and small businesses alike expressing frustration about system crashes and a lack of direction from the federal government. As the program proceeds, it's become clear that the initial funding wouldn't be nearly enough.

The coronavirus outbreak will forever change the world economy

Illustration: Sarah Grillo/Axios

Both the U.S. and global economies are set to be permanently altered by the coronavirus outbreak and the measures that have been taken in response to it, experts say.

The state of play: "Fundamentally there are going to be huge changes in household consumption patterns, business patterns and global supply chains," Kevin Warsh, a former Fed governor and current economics lecturer at Stanford, said during a Reuters teleconference.