- Congress passed a massive two-year budget deal on Friday, ending a short government shutdown.
- Economists are trying to piece together what the package means for the economy.
- Some argue that its massive amounts of fiscal stimulus come at a time when the economy least needs it and actually be detrimental.
- Others say that the increased deficits won't matter and could actually end up being beneficial for Americans.
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The massive $500 billion budget deal could be coming at exactly the wrong time for the economy
The massive fiscal stimulus could be a terrible idea for the current economic situation, or it could be just what the doctor ordered depending on how you ask.
President Donald Trump is set to release a budget blueprint that proposes $3 trillion in spending cuts over the next decade.
Don't believe it.
Early Friday morning, Congress passed a giant two-year funding agreement that will wrack up nearly $500 billion in new spending, paving the way for a massive increase in the federal deficit.
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Economists and market analysts are scrambling to assess what kind of effect the spending spree, and a Trumpian spin on fiscal conservatism, will have on the economy.
To some economists, the huge deficit spending plan is coming at just the wrong time. To others, it doesn't matter much at all. Most agree, however, that the package's effects will be complicated and could take years to unfold.
Either way, the new agreement does send one big signal, said Greg Valliere, chief global strategist at Horizon Investments.
"The real story will be the end of an era — fiscal conservatism will be dead, the big spenders will have prevailed," Valliere said in a note to clients Thursday.
Deficits at levels we havent seen since the crisis
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According to the Committee for a Responsible Federal Budget, a group that advocates for fiscal responsibility and reducing the national debt, the plan will add roughly $320 billion to the deficit over 10 years.
But the CRFB estimated that if the current spending caps are carried forward over a 10-year stretch, the agreement could pile up as much as $1.7 trillion in new deficits.
That comes on top of the recently passed Republican tax law, which is projected to add roughly $1.5 trillion to the deficit over 10 years.
The double whammy means the deficit — the amount of money the federal government takes in this year minus the amount it spends — will end up around $880 billion in 2018 and $1.15 trillion in 2019, according to estimates. An annual $1 trillion deficit hasn't happened since 2009 to 2011, during the depths of the financial crisis.
Wrong time for stimulus?
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Valliere said adding massive amounts to the deficit makes little sense now.
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