AP Explains: US debt will soon exceed size of entire economy

WASHINGTON (AP) — The U.S. government's war against the coronavirus is imposing the heaviest strain on the Treasury since America's drive to defeat Nazi Germany and imperial Japan three-quarters of a century ago.

The Congressional Budget Office has warned that the government this year will run the largest budget deficit, as a share of the economy, since 1945, when World War II ended. Next year, the federal debt — the sum of the year-after-year gush of annual deficits — is forecast to exceed the size of the entire American economy for the first time since 1946. Within a few years, it's on track to set a new high.

It might be surprising to hear that most economists consider the money well-spent — or at least necessary. Few think it's wise to quibble with the amount of borrowing deemed necessary to sustain American households and businesses through the gravest public health crisis in more than 100 years. That's especially true, economists say, when the government's borrowing costs are super-low and investors still seem eager to buy its debt as fast as the Treasury issues it.

Here's a closer look at the federal debt and the government's use of it to combat the pandemic and the economic pain it's inflicted.

JUST HOW MUCH MONEY ARE WE TALKING ABOUT?

The annual deficit — the gap between what the government spends and what it collects in taxes — will hit $3.3 trillion in the budget year that ends Sept. 30, the CBO projects. That amounts to 16% of America’s gross domestic product, which is the broadest measure of economic output. Not in 75 years has a deficit been that wide.

The federal debt, reflecting the accumulated deficits and the occasion surplus, is forecast to reach 100% of GDP next year. Then it is predicted to keep climbing to $24.5 trillion — 107% of GDP — in 2023. That would snap the record of...