On Monday, America saw one of the largest debt increases in a single day in U.S. history. Aided by the debt limit increase and stop-gap government funding bill freshly signed into law, America’s fiscal future is once again in the spotlight.
Expert commentary and social media posts talk about deficits and debt in abstract terms, leaving many to think how a $20 trillion debt affects them, and, if it does, what can be done to fix it?
While it is easy to see the costs of federal taxes when they are deducted from your paycheck, the national debt is a much more subtle threat that affects Americans in a multitude of ways.
For one, needless spending wastes tax dollars today, while committing future taxpayers to pay back our debt tomorrow. According to the independent Congressional Research Service (CRS), “deficit financing tends to crowd out greater levels of private investment in better economic conditions,” thus impacting American jobs. CRS continues: “Such debt eventually must be repaid, either through spending reductions, tax increases, or combination of the two, and may also generate crowding out that could reduce future economic productivity.”
Increasing debt also leads to rising interest costs, which contributes directly to total debt without providing any benefits or services to the American taxpayer. When the Federal government runs a deficit, it borrows the difference from creditors which include private citizens, businesses, and foreign governments. These creditors get paid an interest on their investment. In 2015, the U.S. spent over $200 billion, or 6 percent, of the Federal budget servicing interest on the debt. Save for entitlement and benefit programs, the Congressional Budget Office (CBO) projects that interest on our national debt will be the largest budget item in 2024, costing $800 billion. In practical terms, this means future generations will be forced to pay taxes for the overspending committed by current generations, rather than investments in homeland security or infrastructure in their day.
Massive accumulating debt provides more money for Congress to spend now, at the cost of economic growth and opportunity of future generations. According to CRS, “a growing Federal debt could place a high burden on future generations and hinder economic growth. Rapid growth of Federal debt could also increase the probability of a financial crisis or fears of a sovereign default.” There should be no mistake, Washington’s fiscal negligence is dramatically affecting opportunities for coming generations.
In fact, we’re already seeing a decline in incomes for young Americans in the United States today. According to the U.S. Census, young Americans are making about $2,000 less, on average, than their parents did when they were young. CBO, the Government Accountability Office (GAO), and even the past Obama Administration all agree that the current set of fiscal policies will lead to an unsustainable debt burden if left unchanged.
Erskine Bowles, former President Bill Clinton’s Chief of Staff has said: “I think today we face the most predictable economic crisis in history. Fortunately, I think it’s also the most avoidable. I think it’s clear, if you do simple arithmetic, the fiscal path that the nation is on is simply not sustainable.”
So what can we do about it?
Entitlement programs are the major driver of the national debt, and a serious debate ending with major reforms must take place soon if we are to avoid a fiscal calamity. But there are other things Washington can do to address our nation’s fiscal problems, including in places where there should be broad agreement like waste, fraud, and duplication.
While waste is a relative term, many would agree that getting birds drunk to find out if they slur when they sing, as one government funded study sought to find out, is not as important as investments in life-saving medical care or fixing crumbling infrastructure. No doubt you have probably seen one of the dozens of waste reports issued annually that usually leave people scratching their heads saying, “how is THIS a priority?”
Next, federal programs that have run astray squeeze the federal budget while offering little or no actual help for those who receive their services. GAO and Inspectors General throughout the Federal government have detailed ways to fix programs that are not meeting their intended goals, yet nothing is done. Often the hold up on these fixes is that every program, however inefficient or wasteful, has a constituency that some politician is protecting from reforms or elimination, leaving taxpayers to continually subsidize programs that are failing. For example, a federal program that subsidizes flights to wealthy New England vacation destinations.
Finally, duplicative programs must be addressed to achieve a more efficient and effective federal government. These duplicative programs often work at cross purposes, are administered by a variety of agencies with different rules and criteria, and squander resources that could be used to better the lives of all Americans. For example, according to GAO, there are at least 160 Federal programs at 20 different federal agencies that support housing.
Years of failing to address our nation’s fiscal house has put us in a shocking degree of risk. Boiled down, each individual’s share of the debt totals $166,000, and unfunded liabilities, like Medicare and Social Security, total $875,000 per taxpayer.
It will be no small feat to reverse our unsustainable fiscal course. But if we want future generations of Americans to enjoy similar freedoms we share today, it should be our top priority, and we must start now. As our foundation’s founder and former Senator Tom Coburn has said, “the vast amount of waste and sheer stupidity in government – from the Pentagon to the Food and Drug Administration – could fill committee agendas for years.”