A few weeks ago the debt passed 21 TRILLION DOLLARS, but I was out to lunch with the rest of America. Pollsters say that hardly anybody cares about the debt any more. Deficits stimulate the economy, right? Doesn’t that mean jobs? Ummm, that sort of “stimulus” is a dubious way to try to climb out of a recession. Even if the government manages to lift GDP by spending an extra trillion, and creates two million jobs, those two million workers will be back on the unemployment line as soon as the trillion-dollar program ends. The economy will shrink the following year.
Even those who bought into the idea that we could “jumpstart” the economy with spending said that we’d pay the resulting debt back, or at least balance the federal budget, once the recession ended. Our last recession was nine years ago, and we’re still trying to pump up the economy by spending way more than we collect in taxes. Cutting taxes made the problem worse!
The debt was $2.5 trillion in 1988, and $5 trillion in 1996. It doubled again to $10 trillion in 2009, and doubled again to $20 trillion in 2017. $40 trillion is just a few years down the road, because the Baby Boomers are retiring. They’re paying less tax, and beginning to collect Social Security and Medicare. Social Security says that in 2035 it will only be able to pay 75% of your promised benefits—it says this right on your benefit statement!—and the Medicare trustees say that they’ll run out of money in 2029, which is just 11 years from now. Federal Medicaid spending is growing like kudzu, and it’s clobbering state governments even as it busts budgets in doctors’ offices, in hospitals, and in Washington.
Future deficits will also grow because of interest payments. Interest payments, that is, on the much-larger debt. We haven’t had to worry about this because interest rates have been at the lowest levels since the Pilgrims landed; but now they’re rising. Last year Congress only had to pay $262 billion in interest, but if we pay at a 5% rate on $21 trillion we’ll pay more than a trillion dollars. A trillion is still real money, because Congress only collects a little more than $3 trillion a year in taxes. We collected $3.27 billion in 2016, and might collect $3.34 trillion in 2018. The debt will spiral higher.
In recent years government has been creating money out of thin air, but eventually that will cause inflation. So the federal budget really IS just like a household budget; if you spend a lot this year you’ll have to tighten your belt in the future to pay for it. You feel rich when you buy that new car, but then you feel poor in the years that follow, because you have to pay the money back. The government can put off the day of reckoning much longer than a household can, but eventually we’re all going to feel the pinch of slashed budgets. The social safety net will shrink, even as the economy slows and unemployment rises. Wouldn’t it be better to balance the budget now?