Our federal debt is a looming crisis and hard choices are coming.
America’s future fiscal outlook is disastrous but forgotten on the campaign trail this year.
The national debt is setting historic records, but both President Joe Biden and former President Donald Trump have ignored plans that focus on the United States’ financial future. In the recent presidential debate, both candidates blamed the other for ignoring our debt Armageddon. Both parties have buried their heads in the sand.
This past week the International Monetary Fund warned that America’s increasing debt must be “urgently addressed.”
The pandemic and previous years’ deficits have taken the nation’s debt today to just shy of $35 trillion, an increase of over 514% since 2000 and a dangerous record.
Our national debt was $5.67 trillion in the year 2000, $13.6 trillion in 2010, $26.51 trillion in 2020.
Our debt is over 33% of the entire world’s combined debt of $91 trillion.
Next year, interest payments alone on our debt will top $1 trillion according to the Congressional Budget Office.
The Congressional Budget Office, Congress’s fiscal watchdog, defines national debt as the amount of financial liability that the federal government holds. This includes public debt, mostly U.S Treasury bonds and intragovernmental accounts, primarily Social Security, Medicare and Medicaid.
Debt is not to be confused with our budget deficits. A deficit is when the government spends more money than it takes in a particular fiscal year. Debt is the total value of deficits we have accumulated over time.
Just how much is $35 trillion of debt? It’s hard to conceptually grasp just what “$1 trillion” means.
Let me help:
Today our national debt is larger than the economies of China, Japan, Germany and the United Kingdom combined.
If you go back in time one billion seconds, you’d be around the year 2002, going back one trillion seconds, you’d land around 30,000 B.C.
If you spent $1 every second around the clock, it would take you 31,688 years to spend $1 trillion.
The amount of national debt is enough to cover tuition for a four-year college degree for every U.S. high school graduate for over 106 years.
Take a look at these stunning statistics:
Each U.S. citizen’s share of the debt is $101,000; the debt per taxpayer is $259,000.
If every U.S. household contributed $1,000 per month toward paying down the national debt it would take over 22 years.
We are approaching a dangerous tipping point: A recent survey by the CBO is already warning that soon foreign adversaries like China will exploit our debt crisis, crippling our status as the world’s strongest superpower.
Politicians and all Americans should be alarmed. There’s a large number of aging baby boomers who are becoming more reliant on Social Security, Medicare and Medicaid, which will further raise the U.S. debt.
The CBO’s long-term budget outlook expresses other alarming consequences of a large and growing federal debt, there are four major ones: lower national savings and income; higher interest payments, which lead to large tax hikes and spending cuts; and decreased ability to respond to future economic problems. In essence, a greater risk of a fiscal crisis.
“The U.S. federal debt is on an unsustainable path, and has been for some time,” Jerome Powell, Federal Reserve chairman, was recently quoted as saying. However, when the country eventually pulls out of its current high interest rates, Americans will be left with a debt hangover.
Addressing the national debt requires a multifaceted approach. Policymakers must consider both revenue and expenditure measures to begin to change the debt trajectory.
To name just a few:
Tax reform: Comprehensive tax reform to help increase revenues. A more progressive tax code can help address income inequality
Spending cuts: Reducing government spending is another key component. However indiscriminate cuts can harm vulnerable populations and thus hinder economic growth
It is projected that the federal government will spend over $1.6 trillion more this fiscal year alone than it collects in revenues. About $870 billion of this is interest we’re paying on money we have already borrowed.
Entitlement reform: Security Medicare and Medicaid are significant drivers of the debt. This could include legislation such as raising the retirement age, adjusting benefits but not cutting them and implementing more cost-saving measures in health care.
Promoting economic growth: Promoting robust economic growth is crucial to managing the national debt. But we can never sustain a strong economy driven by over 70% of consumer spending.
Political will: Political posturing will not keep the American dream alive. Addressing the national debt will also require a strong political will and bipartisan cooperation. The real dialogue now is to find real solutions. Political posturing will not keep the American dream alive.
Thomas Jefferson, who died deeply in personal debt, warned that “excessive debt is a means by which governments oppress the people. No nation has a right to create debt for periods longer than the majority of citizens contracting the debt can expect to live.”
Jefferson and the other founding fathers are probably turning over right now in their graves. This is not the country they envisioned when they laid down their lives.
We have kicked the can down the road long enough, putting our children in the difficult position of having to solve this catastrophic problem.
A national debt crisis is coming, politicians need to recognize the urgency. We are leaving our children with a debt so large that their future standard of living, and opportunities will be significantly compromised.
For our children’s sake, let’s stop and pick up the can before our road ends, and they are left to clean up after our extravagant selfish party.
Jim Martin is a past Regent of the University of Colorado. He can be reached at jimmartinesq@gmail.com.
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Originally Published: July 9, 2024 at 3:38 p.m.
