The US debt pile could swell further as COVID-19 drives lasting uncertainty, Treasury Department says
- The Treasury Department said Wednesday the pandemic continues to cloud its future borrowing needs.
- Debt issuance ramped up in 2020 and will continue to do so as expenses mount, the department said.
- Still, the Treasury's cash balance needs to be reined in ahead of a key debt-ceiling deadline.
Even as vaccines are distributed nationwide and COVID-19 cases fall, the US government may need to take on swaths of new debt to get through the pandemic.
Borrowing related to the costs of COVID-19 is likely to stay elevated well into 2021, the Treasury Department said Wednesday. The government expects to continue ramping up its debt offerings to pay for hefty economic stimulus, public health measures, and other pandemic-related costs.
Public debt in the US reached a record $27.7 trillion at the end of 2020. The sum stands to soar even higher as Democrats push for additional fiscal stimulus.
"Treasury continues to face uncertain and sizable borrowing needs due to expenditures associated with the government's response to COVID-19 as well as the impact of the pandemic on economic activity and government receipts," Brian Smith, the department's deputy assistant secretary for federal finance, said in a statement.
The Treasury aims to raise $63.1 billion next week across offerings of 3-year notes, 10-year notes, and 30-year bonds. The department plans to keep large cash balances on hand due to "ongoing uncertainty" regarding pandemic-related costs. The balance stood at $1.7 trillion at the end of last year.
The department began increasing its issuance in April 2020 to finance the CARES Act and other relief legislation. Larger offerings throughout 2021 should pad against any unexpected expenses, the Treasury said.
"Treasury believes that these changes have created sufficient capacity to address near-term projected borrowing needs," Smith said.
The department also plans to keep large cash balances on hand due to "ongoing uncertainty." The balance stood at $1.7 trillion at the end of last year. Cash holdings are expected to decline over the next quarter, but the path and extent of the decline hinge on the pace of outflows and the possibility of new relief spending, according to the statement.
The Treasury needs to rein in its cash balance before a key deadline if it hopes to maintain flexibility in its borrowing plans. Congress suspended the US borrowing limit in 2019, but the ceiling is set to take effect again in August. If the department is unable to draw down its cash balance sufficiently, the limit's reinstatement of the debt limit could hinder future issuance.