No end to mountain of debt

Re cent expiration of the $600-per-week federal supplement to unemployment benefits is among the drivers of negotiations in Congress over a new coronavirus relief bill. Democrats want to see that continued; Republicans prefer a lower amount.

One topic receiving little attention, meantime, is how the country plans to pay for it all. Earlier relief packages totaled more than $3 trillion, and the new one is expected to cost at least $1 trillion and may blow well past that.

U.S. Rep. Markwayne Mullin, R-Westville, is among those experiencing some heartburn as negotiations continue. “It's not like we have this money setting in the Treasury Department. We're writing checks off the IOUs,” Mullin said during a recent virtual town hall.

Brian Riedl, an economist and Manhattan Institute senior fellow, wrote recently that the national debt has increased by $3.1 trillion since mid-March, but that little of it has been financed by foreign borrowing. Instead, Riedl said, the Federal Reserve increased its Treasury holdings by $1.7 trillion and the rest has come from domestic savings such as banks and state and local governments.

“But this model may not be sustainable,” he wrote at National Review Online. “Economists have long argued that rising debt is affordable because the large global economy will continue to eagerly lend America — creator of the world's reserve currency — dollars at low interest rates. Yet international borrowing has not kept up with America's rising debt. While foreigners held nearly half of America's $10.5 trillion debt at the end of 2011, they have funded less than one-fifth of the extra $9 trillion in borrowing America has undertaken since.”

Riedl noted that the pandemic caused Washington to borrow $1 trillion per month from April to June. The unlikelihood of a quick economic turnaround, and the next relief bill, he said, will combine to push the deficit to roughly $4 trillion this year “and ensure it averages $2 trillion annually over the rest of the decade.”

The national debt held by the public, Riedl wrote, is projected to reach a dizzying $41 trillion by 2030.

He notes that borrowing $24 trillion or more during the decade would push debt held by the public from 79% of gross domestic product to 128% of GDP, the highest rate since World War II. The debt fell steeply after the war, whereas “our present national debt is set to continue rising steeply for decades because Social Security and Medicare face a 30-year cash shortfall of more than $100 trillion.”

Many Americans are paying attention. According to the latest Peter G. Peterson Foundation monthly Fiscal Confidence Index, 80% of voters said their level of concern about the national debt had increased in recent years, and 75% believe the debt should be among the president's and Congress' top three priorities.

This pandemic will be behind us someday. Will we ever be able to say the same about the nation's growing mountain of debt?