Perhaps the most famous quote from Benjamin Franklin is his quote on personal finance.
“Beware of little expenses; a small leak can sink a great ship.”
The United States is a great and mighty ship. Our ship has traveled to space, conquered evil, and endured a civil war. To say the least, our relatively young country is battle tested. But while we’ve been focusing on plundering the seven seas, we’ve forgotten to swab our own decks.
The Congressional Budget Office (CBO) released its long-term debt projections this week that warned of “large and growing federal debt over the coming decades [that] would hurt the economy and constrain future budget policy.” Shockingly, CBO projects the net interest on the federal debt will exceed Social Security spending by 2048, and exceed ALL discretionary spending by 2045.
Net interest is money that goes to nothing but servicing our creditors. When the federal government runs a deficit, it borrows the difference from creditors which include private citizens, businesses, the Federal Reserve, and foreign governments. These creditors get paid an interest on their investment. In 2017, the U.S. spent over $310 billion, or 7.4 percent, of the federal budget servicing interest on the debt. In 2045, long after the people that created this mess are gone, interest costs may be larger than defense, infrastructure, and health research combined.
The CBO report is just one in a a series of recent reports warning Congress of our country’s unsustainable fiscal path. The Government Accountability Office’s (GAO) annual Fiscal Health report warned Congress saying, “The Congress and administration face serious economic, security, and social challenges that require difficult policy choices in the near term…These policymakers also face…an unsustainable long-term fiscal path caused by a structural imbalance between revenue and spending, absent a change in fiscal policy.” The Social Security and Medicare actuaries also projected the trust funds will both be depleted within the next 20 years.
All of these nonpartisan, independent reports make one thing crystal clear, if nothing is done to fix the holes in our sinking ship now, it may be irreparable in the future.
Though the timing of fiscal crises are always hard to predict (if they were predictable, it probably wouldn’t be a crisis), they always seem so clear in hindsight – or perhaps it is more clear, at present, than we think. Future generations will point to the countless CBO and GAO reports warning us of fiscal crisis.
So why has Congress chosen to ignore the writing on the wall? Are there any grown-ups on Capitol Hill that can see past their own reelection desires?
Congress’s inaction is actually laughable. For example, the Social Security trustees have recently projected that there will be a 25% cut to Social Security in 2034 if programs are not reformed. Literally 20% of the U.S. population (63 million) receives some form of Social Security, and is perhaps the most important federal program. Yet, it’s an issue that doesn’t even get a thought in Congress.
When it does come up, it’s a political given that any reforms that come to programs in the future will likely have no effect on baby boomers. Those benefits are locked in. Not only has the generation plundered the future to pay for current spending (see: $21 trillion debt), they’ve also declined to participate in saving the future.
While it’s been overused in political circles, the current generation is “kicking the can” on all of the important issues and leaving future generations to pick up after them.
There is a feeling in America that the political polarization has never been worse. That may be true in the discourse, but Congress has never been more united in ignoring out-of-control federal spending and our unsustainable fiscal course. If this continues, the polarization will switch from political parties to generations. America could be on the cusp of a seismic shift, where age plays a larger role in who voters turn out for at the polls. That shift, and the state of the ship, relies on what the current generation in Congress does with the time they have left in office.
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