Tipping point is now

(David, “Record government and corporate debt risks ‘tipping point’ after pandemic passes,” pg online @ https://www.washingtonpost.com/us-policy/2020/04/18/record-government-corporate-debt-risk-tipping-point-after-pandemic-passes/ //um-ef)

The United States is embarking on a rapid-fire experiment in borrowing without precedent, as the government and corporations take on trillions of dollars of debt to offset the economic damage from the coronavirus pandemic. The federal government is on its way this year to spending nearly $4 trillion more than it collects in revenue, analysts say, a budget deficit roughly twice as large relative to the economy as in any year since 1945. Business borrowing also is setting records. Giant corporations such as ExxonMobil and Walgreens, which binged on debt over the past decade, now are exhausting their credit lines and tapping bondholders for even more cash. To support such borrowing, the Federal Reserve has dropped interest rates to zero and added more than $2 trillion of loans to its portfolio in the past six weeks — as much as in the four years following the Great Recession. All this borrowing is required to plug the gaping hole the novel coronavirus has punched in the economy, as unemployment reaches levels not seen since the Great Depression. Few, if any, prominent economists or lawmakers opposed opening the government’s fiscal taps amid the current economic emergency. The Senate last month approved $2 trillion of crisis spending with a vote of 96 to 0. Yet high debt loads already are straining many corporations, which may be forced to choose between skipping loan payments and laying off workers. Millions of consumers, too, face sizable monthly bills for student loans and credit cards, a burden that could weigh on any economic rebound. The reliance on so much debt also will leave scars after the pandemic passes, economists say, making it difficult for policymakers to withdraw support and leaving the economy more vulnerable than before this crisis began. “We should be very worried,” said Atif Mian, an economics professor at Princeton University who has written widely on the subject. “We are talking about a level of debt that would certainly be unprecedented in modern history or in history, period. We are definitely at a tipping point.”