Even without severe deflation or inflation, a long-term increase in government outlays is bad news for America’s future. While emergency spending generally falls over time as the underlying crisis passes, economist Robert Higgs persuasively documented in his book Crisis and Leviathan that some emergency spending does not ever go away; government grows permanently larger as a result of intervention.

This is very much a problem. In a recent analysis of the current situation, economist Jamus Lim wrote that “large fiscal expenditures, as well as more loans by households and firms, will lead to sharp increases in public and private debt in the near future” and that “increases in total debt to GDP have significant negative effects on [economic] growth.”

In a review of academic papers published since the Great Recession, my Mercatus Center colleague Jack Salmon and I confirmed that insight. All but two of the studies found a negative relationship between high levels of government debt and economic growth. The empirical evidence overwhelmingly supports the view that a large amount of government debt hurts economic growth, and in many cases the impact gets more pronounced as debt increases. Prior to the COVID-19 crisis, Salmon and I calculated that “the effects of a large and growing public debt ratio on economic growth could amount to a loss of $4 trillion or $5 trillion in real GDP, or as much as $13,000 per capita, by 2049.” And spending has only shot upward since.