Sh-h-h. Don’t say a word. I have a secret to tell you. It’s something no one wants to talk about; but it’s very important.
It’s called the national debt. And it’s going up; way up. But don’t tell anyone. It’s supposed to be a secret.
America’s trade war with China and other big events have largely eclipsed reports that the budget bill recently passed by Congress and signed by President Donald Trump, coupled with last year’s tax cuts and spending measures, will push our nation’s annual deficits to the trillion-dollar-plus range next year and thereafter, absent a big change in our tax and spending policies.
I know, I know. You’ve heard this before. Move on, there’s nothing to see here.
But we really should pay attention. That is, if we want to avoid saddling our children and grandchildren with debts that we ourselves choose not to pay.
Time was, we could count on Tea Partiers to sound the alarm when our nation’s debt threatened to spiral out of control. But their voices are silent today, as are the voices of most other voters who seemed to care about our nation’s financial health.
A cynic might conclude that concern about the nation’s debt is a partisan issue, worth highlighting only when “the other” party is in power.
But I refuse to be that cynical. Surely there are readers out there who worry about the debt we’re amassing for future generations to pay.
How big is that debt? Let’s take a look.
According to the Congressional Budget Office, our nation’s debt in 10 years will nearly equal the size of our economy, reaching 95% of GDP by 2029. Under the likely scenario that Congress extends some popular policies, like individual tax cuts, the debt will roughly equal the red ink America ran up to pay for World War II — topping 100% of GDP in 10 years.
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During World War II, 95% of federal spending was on defense. The nation had little choice but to run up big debts to pay for the unexpected surge in outlays for military operations, weapons and materiel.
Today, most federal spending is on health, retirement and interest payments. And those outlays are on auto-pilot, governed by formulas mandated by Congress. Spending in these areas will account for about 80% of the growth in spending over the next 10 years.
“Discretionary” spending — subject to annual appropriations by Congress — will grow more slowly than mandatory spending, with defense and veterans’ programs receiving a bigger share of the total than such non-defense programs as education, international affairs, justice/law enforcement and highway/infrastructure.
And while today’s low interest rates help, interest payments on our debt will take a larger share of the budget than before. Those interest payments will rise even more if rates rise.
Revenues — taxes on individuals, payrolls, and corporations — will rise, but more slowly than spending. So the gap between revenues and spending will grow.
According to CBO, annual deficits will average $1.2 trillion between 2020 and 2029, accounting for between 4.% and 4.8% of our economy, or “well above the average over the past 50 years.”
Unlike during World War II, our current spending trajectory is highly predictable, as is our revenue path. It’s clear as day that we’re choosing to keep our government benefits and other spending flowing higher than what we’re willing to pay in taxes.
That’s a choice. And our children are on tap to pay the bill.
But remember: Don’t say a word. This is our secret.