Illustration: Eniola Odetunde/Axios

The Congressional Budget Office estimated Friday that the U.S. budget deficit will be roughly $3.7 trillion for fiscal year 2020, with public debt projected at 101% of GDP — and that was before the "phase four" $484 billion relief package passed by Congress late last week.

Why it matters: In a world of historically high income inequality and historically low productivity and growth, in which debt levels were already historically high, the U.S. and the world at large are in wholly unprecedented territory.

  • Already, government spending is far outpacing any previous period in American history and there is no end in sight.
  • Following World War II, which was the last time the ratio of public borrowing to GDP approached its current depths, the U.S. was able to use the spending on programs that grew the economy and built an unrivaled middle class.
  • There is little expectation that the current debt will lead to a similar outcome.
Data: CBO's projections for calendar year 2020. Table: Axios Visuals

Driving the news: Following the $2.2 trillion CARES Act and the "phase four" relief package, Congress has signaled there is still much to do, with various "CARES Act 2" proposals in the pipeline.

  • The White House also has made clear it is prepared to back more spending, with President Trump refocusing his efforts "on the economy and a more hopeful, forward-looking message," as Axios' Jonathan Swan reports.
  • Presumptive Democratic presidential nominee Joe Biden has asserted that he favors new economic measures “a hell of a lot bigger” than the CARES Act.

Goldman Sachs researchers in a note Sunday said they expect Congress to approve another $550 billion before the 2020 fiscal year ends in September, plus untold spending on infrastructure, direct payments and unemployment benefits to come in fiscal year 2021.

Between the lines: Already, critics of the government spending have started to emerge from all sides...

  • Some accuse Washington of abandoning ordinary Americans in favor of big business.
  • Some oppose direct cash payments and increased unemployment benefits.
  • Some argue Congress has cravenly dispersed funds to friends and favored industries over the greater good.

The big picture: Economists have warned for years that excessive government spending would crowd out private investment and drive interest rates higher, choking off growth and undermining the economy.

  • Either they are right and we are doomed to prolonged economic misery or they are wrong and a full-scale reappraisal of the modern economic model is underway.
Data: CBO, BEAU.S. Treasury; Table: Axios Visuals

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