At a time when political discourse has utterly devolved, with the loudest voices insisting the other is certain to totally destroy the American project, it is almost quaint to consider the perennial issue of the national debt. But, it’s a serious problem that has only worsened as federal officials concern themselves less with the fiscal health of the federal government and more with how they come across on social media.
On Tuesday, the Congressional Budget Office issued a report projecting the federal budget deficit will hit $2 trillion this year alone. That’s due to federal spending of $6.8 trillion versus $4.9 trillion.
Worse still, the CBO projects this mismatch between spending and revenue to continue through the next decade.
“With … adjustments, deficits equal 7.0 percent of gross domestic product (GDP) in 2024 and 6.5 percent of GDP in 2025,” the CBO reports. “By 2034, the adjusted deficit equals 6.9 percent of GDP—significantly more than the 3.7 percent that deficits have averaged over the past 50 years.”
As a result, the national debt will continue to surge and with it interest payments on the debt.
According to the CBO, interest payments on the national debt are expected to surpass $1 trillion in 2025, compared to the $905 billion set to be spent on national defense. By comparison, the amount of spending on Social Security is set to be just over $1.5 trillion.
While both parties have long since abandoned even the pretense of concern about federal debt, the risks are real.
As explained by Romina Boccia and Dominik Lett at the Cato Institute, “Excessive government debt drags down the economy by crowding out more productive investments that improve American living standards.”
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Further, “as debt grows unabated, there is the risk of a sudden loss of confidence in bond markets, with investors demanding much higher interest rates that could trigger a debt doom loop and broader fiscal crisis.”
That’s what happened to Greece in 2009, for example.
The United States is very much unlike Greece, to be sure, but we have all already seen how quickly the U.S. dollar can be devalued. If the federal government tries to print away the pressure of debt, that will only be to the detriment of the American people.
This unsustainable trajectory can and should be halted. Both parties need responsible leaders who can ensure that spending grows alongside the economy, and no further. Entitlement programs must be kept in check and no part of the federal budget should be immune from cuts.
We can only hope that it doesn’t take an economic crisis for lawmakers to figure things out, though that certainly seems like what it will take.