The national debt is closing quickly on $ 29 trillion. The federal government now owes an incredible $ 228,999 per taxpayer. Meanwhile, politicians in Washington, DC are wrangling over whether to spend $ 4.5 trillion more or “just” $ 1.5 trillion. Yet almost entirely omitted from the debate over the so-called “infrastructure” spending bonanza is the fact that the federal government is already running off a fiscal cliff, as a new analysis clearly shows.
Brian Riedl of the Manhattan Institute recently published his 2021 Card Book, and it paints a devastating picture of the federal government’s finances. Here are 4 charts that show how fast we are approaching fiscal disaster.
1. The national debt will almost double from 2019 to 2031
Riedl estimates the trajectory of the national debt even under the optimistic assumption that new spending programs are not added. However, it shows that the federal debt will almost double by 2030.
2. Biden’s Budget Proposals Would Raise National Debt Beyond 250% of GDP in 30 Years
What matters is not only the total amount of debt, but also how it relates to the overall size of our economy, as measured by gross domestic product (GDP), which reflects the output of the United States in a year. Right now we’re already above a 100% debt-to-GDP ratio, which is normally seen as a red flag, but according to Biden’s proposed additions to the baseline budget, the debt would reach an incredible 250% of GDP within 30 years. That’s right: we owe 2.5 times more than what we earn each year.
3. Growing social security and health insurance deficits drive almost all of the 2019-2031 deficit increase (non-pandemic)
Some progressives like to cite military spending and tax cuts as the drivers of the nation’s deficit problems. (And there is certainly a lot of room for cuts in the defense budget). However, the reality remains that the various welfare state welfare programs are really at the root of the problem. Riedl shows that the future deficits projected until 2031 are mainly due to the huge funds that will be needed to prevent Social Security and Medicare from collapsing.
4. The 2017 tax cuts contribute relatively little to the soaring deficits
No, it’s not the GOP tax cuts in 2017 that are really causing this problem. Yes, corporate tax rate cuts, income tax cuts and other changes will likely cause the federal government to collect less revenue than it otherwise would have. Yet it is a small price to pay for reducing the heavy burden of the corporate tax rate on workers and more generally for allowing Americans to keep more of their own money. And, as Riedl shows, it is only a marginal contributor to the soaring forecast deficits.
Why is all this important?
Many Americans could see these numbers and charts and feel that their eyes are starting to glaze over. The dismal finances of the federal government can certainly seem like an abstract issue or a distant one. But unless Congress drastically limits its spending dependency, Americans will feel the consequences in their everyday life.
In just a few short years, annual interest payments on the debt that taxpayers have to finance are expected to reach $ 1,000 billion. If interest rates rise even modestly, this amount could skyrocket. Right now, even before all this new debt, taxpayers spend $ 800 million per day just the interest on the national debt. Further progress in this direction will ultimately translate into massive tax increases.
Likewise, we will also face slower economic growth and lower wages as debt crowds out private sector investment and pulls the economy down.
“Deficit spending extracts resources from the real economy and there is no guarantee that the government will use these resources better than the private sector, ”Véronique de Rugy, senior member of the Mercatus Center, told FEE. previous interview.
Indeed, many studies show that higher debt leads to lower economic growth – that is, lower income growth for ordinary Americans.
“We’re probably already paying for the increased debt levels in the form of a lower standard of living,” de Rugy said. “And we will continue to suffer if we continue like this. “
What else, we continue to court a fiscal crisis in the near to medium term future. According to Peter J. Peterson Foundation, high levels of federal debt mean “increased risk of a fiscal crisis” which “could further destabilize the US economy and erode confidence in the US currency internationally.”
Voters should therefore find the trends exhibited by Riedl’s revelations deeply concerning. If the federal government does not clean up its house, it is ordinary Americans, not politicians, who will end up paying the price.
Click on here for Brian Riedl’s full chart book and report.