Bipartisan inertia on massive debt

It’s a slow-moving train wreck but the important thing to remember isn’t its speed, but that it’s a wreck.

Understanding the nation’s debt picture is essential to steering votes toward candidates of any party who understand the threat debt poses and will be courageous enough to do something about it.

It’s a slow-moving train wreck but the important thing to remember isn’t its speed, but that it’s a wreck.

That’s why the Congressional Budget Office’s 2019 Long-Term Budget Outlook is so troubling. The federal debt by 2049, CBO says, will likely be nearly 150 percent of the gross domestic product.

With debt like that, interest payments alone will likely choke economic vitality.

And keep in mind, all government spending – whether on an essential service or an interest payment on existing debt – is essentially taxation. All that money has to come from you. The government cannot spend money on one thing without first taking the money to do so from someone else.

Why care? Eventually if nothing serious is done, just the interest paid on the national debt will crowd out operations and essential services the government has set forth as public policy.

In the free-stuff era, that means a lot of people not won’t get their free stuff.

It also means government functions will likely be paid for not just with confiscations from productive citizens, but with new debt issued by government (akin, in simplistic terms, to the Fed printing money).

Check out the trajectory: In 2007, federal debt stood at 35 percent of GDP; by 2012 it had doubled, to 70 percent.

By the end of this year it’s expected to be about 78 percent of GDP.

That’s high by historical standards but chicken feed compared with where we’re headed by 2049.

The right famously cites spending practices and policies followed by the previous administration as adding to the federal debt more than all previous presidents combined (it’s $22.22 trillion now, was $10.6 trillion in 2009). True, but the picture is worse than that.

Due to the aging of the Baby Boom generation, a lot of that spending was on autopilot, as it is today. So even without a “stimulus” or a “bailout” or a “clunker” replacement program, the economy’s glide path was already heading for serious trouble.

CBO says if productivity growth and interest rates don’t make any big moves from their current status, debt will be at 149 percent of GDP in 30 years. But remember, CBO uses what economists call static revenue analysis to make their predictions.

Using a different method, dynamic scoring, can lead to different, and often much more accurate, predictions of human behavior.

That is to say, the economy is not just some static entity that behaves predictably.

People react to economic realities, political policies and personal situations that affect their economic behavior; most static-revenue models cannot accurately predict such things.

So … if CBO’s productivity estimates are just half a point too high over 30 years, debt rises to 185 percent of GDP; if interest rates are a point higher than projected for 30 years (and likely they’ll rise at some point), debt goes to about 199 percent of GDP.

CBO doesn’t say, but what if both happened, if productivity slightly sagged and interest rates ticked up a tad? You don’t even need to guess.

Yet with such an ominous outlook, what current political leader could be termed a “deficit hawk”?

Republicans haven’t said a lot about it; Democratic presidential candidates are talking about multi-billion, even trillion-dollar programs to dispense government largesse it simply doesn’t have.

The prudent action would be to take steps now to trim government spending as a percentage of GDP (it’s 20.7 percent now per year and heading to 28.2 percent by 2049, says CBO).

Reducing transfer payments now would be bitter medicine; stopping them by 2049 would be worse than bitter. This is a time for leaders to act.