Washington’s spending spree
Politics | Americans tolerate massive public debt, but what happens when the bills come due?
by Harvest Prude
Posted 9/10/20, 02:30 pm
WASHINGTON—As lawmakers on Capitol Hill remain deadlocked over additional pandemic economic relief, the nonpartisan Congressional Budget Office is sounding alarms on spending levels not seen since World War II.
For the fiscal year ending Sept. 30, the CBO projects the amount of U.S. government debt held by the American public will climb to $20.3 trillion—98 percent of the country’s annual economy. Debt held by the public will exceed the gross domestic product next year, the CBO said. The total debt, including other means of financing, already tops $26 trillion.
Meanwhile, the nation’s budget deficit—the difference between what the United States spends and what it collects through taxes and other revenue—will hit a staggering $3.3 trillion by the fiscal year’s end, fueled in part by the $2.4 trillion in coronavirus relief funds Congress appropriated earlier in the year.
“We’ve allowed ourselves to accumulate these historically large deficits without making a really big thing of it in the moment,” said Philip Wallach, a scholar at the American Enterprise Institute. “It’s probably the largest peacetime deficit in our nation’s history. That’s kind of remarkable.”
The amount of public debt, or money the government borrows from the public in the form of securities such as bonds, affects how much money is available for loans to individuals. As the national debt rises, interest rates for private loans could also rise, Wallach said. The costs of mortgages, student loans, and other consumer loans could increase, slowing down the economy and saddling borrowers with greater burdens.
The CBO also warned that benefit programs likely will run out of money earlier than previously predicted. The Social Security Trust Fund, initially expected to last until 2032, will hit bottom in 2031 without intervention. Medicare money will run dry in 2024 instead of 2026.
Even before bipartisan coronavirus relief bills sent this year’s deficit soaring, fiscal conservatism had largely fallen by the wayside in Washington.
“Leaders from both parties have been ignoring this issue for years,” said David Ditch, a federal budget researcher at the Heritage Foundation. “You can follow the 24-hour news cycle and almost never hear of the problems of Medicare and Social Security and the debt.”
Before former Vice President Joe Biden secured his party’s presidential nomination, some Democratic candidates gave lip service to tackling the debt-to-GDP ratio. But none of them explained how they would do that while funding their proposed pricey platforms. Biden told The Washington Post he would “work with Congress to ensure we are addressing our national debt in a fair and effective way.” His plan includes reversing the Tax Cuts and Jobs Act enacted by Republicans under President Donald Trump and ensuring, through unspecified means, the “super-wealthy and corporations … pay their fair share.”
During the 2016 campaign, Trump promised to eliminate the federal debt in eight years, but his second-term agenda makes no commitments even to balance the budget or lower the nation’s debt-to-GDP ratio.
Most economists, including those at the CBO, said lawmakers should keep cutting checks as long as the United States grapples with the coronavirus, despite the unsustainable deficit and debt.
“To the extent that you can target spending to help us beat this pandemic and restart our economy, I think putting aside the worries about the deficit is the right thing to do,” Wallach said. “We’re not tipping over some cliff by going into this over 100 percent territory, but we need to remember that the debt burden is very real.”
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