Record debt and deficits threaten national stability
Today the U.S. national debt stands at more than $30.4 trillion. That represents a debt of more than $91,500 for every single person in America. Will this be an issue in the November midterm elections? No.
It sounds impossible to fix but it can be fixed. To do that Congress and the administration need to stop spending more than they collect in revenue. When the federal government continues to spend more than it takes in, we borrow money to cover the annual deficit. And each year’s deficit adds to our national debt.
We know why our deficits are escalating — our tax system does not pay for what we spend — and what we spend is disproportionately what the government has promised Americans. Two major categories of government expenditures are for Social Security and Medicare. And two major factors affecting spending were unanticipated — our aging baby boomer generation and the rising costs of health care.
The annual report of the Social Security and Medicare Trustees, released on June 2, warns that the current economic upheaval is imposing increased pressure our bedrock retirement programs. And the assumptions for this report were made even before the recent sharp rises in inflation. Social Security pays benefits to more than 65 million Americans. Medicare covers 64 million, both older and disabled Americans. The Social Security Trust Fund will be unable to pay full benefits beginning in 2035. For Americans reliant on these two programs, the stakes are very high.
The coming shortfalls pose a dire warning. The nation has made promises to the American people that it cannot possibly keep.
The current U.S. fiscal trajectory is unsustainable. In 2021 total revenues were $4.05 trillion. Total spending that year was $6.82 trillion. So, what do we do? We borrow money to make up the difference. Now every day we spend more than $900 million simply paying the interest on our debt. In 10 years, our interest will be nearly triple what it is today.
In April of this year, the Congressional Budget Office issued a report entitled, “The Economic Effects of Waiting to Stabilize Federal Debt.” It states the following: “As a percentage of gross domestic product (GDP), federal debt held by the public is thus projected to climb from 102 percent at the end of 2021 to 202 percent in 2051. A perpetually rising debt-to-GDP ratio is unsustainable over the long term because financing deficits and servicing the debt would consume an ever-growing proportion of the nation’s income.”
In December 2021, Brian Riedl of the Manhattan Institute published a report entitled, “How Higher Interest Rates Could Push Washington Toward a Federal Debt Crisis.” In it, he warns of the dire threat to our long-term fiscal stability posed by rising interest rates.
The dollar’s dominance in world finances provides the U.S. with enormous power and financial superpower status. This dominance also empowers the U.S. to print money. And U.S. currency is generally still trusted.
However, China, India, the European Commission, Russia and Brazil are working hard to find ways to reduce their vulnerability to U.S. sanctions and influence. Our massive debt weakens the dollar, and a weakened dollar is a more vulnerable dollar.
Record debt and deficits threaten the U.S. dollar, U.S. financial dominance and ultimately our national stability. Yet they barely make a ripple in Washington.
Solutions exist. Among them and among the most straightforward is the progressive income tax — based on the simple premise that those who realize the most in income and wealth and who also derive far and away the greatest benefits of our society — merely pay commensurate with their earnings.
Solutions, however, are dependent on the will and foresight of our leaders in Washington — which, sadly, are sorely lacking.