National Debt

Congress Continues to Spend Delusional Amounts of Money

Even without further spending increases, the Congressional Budget Office projects that the national debt will hit 107 percent of GDP in 2023.

|

America's national debt now stands at close to $27 trillion. According to a new report by the Congressional Budget Office, by the end of 2020, federal debt held by the public is projected to equal 98 percent of GDP—and in the following year, this burden will grow to 104 percent of GDP. But its growth doesn't stop there. Even in the unlikely scenario that spending doesn't increase, the CBO projects that national debt will weigh in at 107 percent of GDP in 2023. That'll be the highest level in our nation's history—higher than during the Great Depression and even higher than its peak during World War II.

Yet nobody in Washington seems to care about this disease of chronic profligacy, and COVID-19 has only made things worse. As economist John Cochrane of Stanford University's Hoover Institution rightly notes, the pandemic response "resembles a sequence of million-dollar bets by non-socially distanced drunks at a secretly reopened bar: I'll spend a trillion dollars! No, I'll spend two trillion dollars! That anyone has to pay for this is un-mentioned."

A recent CNBC forum confirms Cochrane's intuition. Former Labor Secretary Robert Reich asserts, "When you have this much unemployment, when you have this much-underutilized capacity; this is the time when the government has got to be the spender of last resort."

While a few interviewees worry about the long-term impact of the debt, many find comfort in the fact that, with interest rates so low, as long as Uncle Sam does not add more debt to the ocean of red ink we already have, a growing economy should shrink the debt-to-GDP ratio. Also, Keynesian claims about the potency of government spending to spur growth seem easier to make during a recession, when demand is inadequate and wages and prices have a hard time adjusting to the new normal.

As Cochrane notes when writing about those who don't worry about debt, "Who is to blame them, really? Markets offer 1 percent long-term interest rates. Blowout spending financed by the Fed printing money—which is no different from debt—has resulted in no inflation so far. Faced with the deep concerns of current voters, worry that our children and grandchildren might have to pay off debt is not particularly salient."

But no one can promise that these conditions will last. For one thing, Congress never reduces spending, even when times are calm and prosperous. Instead, it inexorably hikes spending by more than the taxes that are supposed to pay for it. Ever-larger budget deficits accumulate year after year.

It's legitimate to wonder if investors will still be willing to lend at 1 percent when the debt is 195 percent of GDP—a level the CBO claims we may be at in just a few decades. Dreamers say that investors will still give us money almost for free, yet nobody can plausibly make such a promise. As we learned during the Greek debt crisis of 2008, today's low-interest rates don't prevent tomorrow's rates from rising fast. The move from low to high rates can happen overnight.

Even if we unrealistically assume that interest rates won't ever rise again, the scenario remains grim. Additional debt, even at low rates, must be repaid. And more debt means more repayment. Servicing government debt crowds out private spending in addition to the other government spending that people value.

And, of course, even if the debt doesn't rise, the burden of servicing the current debt will increase if interest rates go up. If both the debt and interest rates rise, the situation could quickly get out of hand.

Even those economists who aren't worried about our debt today recognize that there will be a point when we should start worrying. But they can't say exactly when that point will be reached. My question is this: If it's just a matter of "when" as opposed to "if," shouldn't everyone start worrying now, before it's too late?

Cochrane seems to agree, writing: "We cannot tell when the conflagration will come. But we can remove the kindling and gasoline lying around. Reform long-term spending promises in line with long-run revenues. Reform the tax code to raise money with less damage to the economy. And today, spend only as if someone has to pay it back. Because someone will have to pay it back."

Advertisement

NEXT: Prisoners Have the Right to Access Court Records in Their Own Cases

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  1. Let us hope democrats are in charge when they have to pay it back. Of course, since assholes like Biden, Harris, Warren, Sanders, and dicks like Krugman are leading the charge, they won’t pay anything and plan to let it burn down.

    1. ✧✧✧✧Start making cash right now… Get more time with your family by doing jobs that only require for you to have a computer and an internet access and you can have that at your home. Start bringing up to $9564 a month. I’ve started this job and I’ve never been happier and now I am sharing it with you, so you can try it too. You can check it out here… CLICK HERE FOR FULL DETAIL

      1. ✧✧✧✧Start making cash right now… Get more time with your family by doing jobs that only require for you to have a computer and an internet access and you can have that at your home. Start bringing up to $9564 a month. I’ve started this job and I’ve never been happier and now I am sharing it with you, so you can try it too. You can check it out here…Money90

    2. You need to do some research. Every Republican President has outspent his Democratic predecessor. The biggest spenders have always been Republican Presidents with a Republican Congress. Democratic President Bill Clinton was the most fiscally responsible President of modern times. The Republican have been able to control the narrative on spending, not the spending itself. The Democrats are insane on spending, the Republicans are liars on spending. That is what drove me to being a libertarian.

      1. Fuck off screech you lying piece of shit.

        1. I quit working at shoprite and now I make $65-85 per/h. How? I’m working online! My work didn’t exactly make me happy so I decided to take a chance on something new…FVd after 4 years it was so hard to quit my day job but now I couldn’t be happier.

          Here’s what I do…>> Click here

      2. https://www.thebalance.com/us-debt-by-president-by-dollar-and-percent-3306296

        The Top Five Contributors by Percentage
        Franklin D. Roosevelt: President Roosevelt had the largest percentage increase. Although he only added $236 billion, this was a 1,048% increase from the $23 billion debt level left by President Herbert Hoover. The Great Depression took an enormous bite out of revenues. The New Deal cost billions. But the biggest cost was World War II. It added $209 billion to the debt between 1942 and 1945.4

        Woodrow Wilson: President Wilson was the second-largest contributor to the debt, percentage-wise. He added $21 billion, which was a 727% increase over the $2.9 billion debt of his predecessor. Wilson had to pay for World War I. During his presidency, the Second Liberty Bond Act gave Congress the right to adopt the national debt ceiling.

        It is then Reagan, Bush, then Obama.

        Stop fucking lying.

        1. And Trump debt will exceed Obama’s. Not that I blame it all on him, or on Presidents in general. The pandemic, economic shutdowns and “stimulus package certainly contributed to that, but Trump was on a pace for more debt than Obama before that.
          President’s tend to take the blame, but Congress spends to money.

          “All Bills for raising Revenue shall originate in the House of Representatives; but the Senate may propose or concur with amendments as on other Bills.” — U.S. Constitution, Article I, section 7, clause 1
          “No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law; and a regular Statement and Account of the Receipts and Expenditures of all public Money shall be published from time to time.”
          — U.S. Constitution, Article I, section 9, clause 7

          The President gets to submit his budget (wish list) but Congress has no duty to fund it. Congress passes spending bills, and the President signs it into law or veto’s it.

          Take the “stimulus” package. Considering every member of the House and every Senator present (a few Senator’s were home self isolating) the President has little choice but to sign the spending bill into law, or his veto would be immediately overridden, and the President painted as not caring about hurting Americans, to big a political loss to take that chance.
          Presidents, like Quarterback get to much credit and to much blame.

        2. You need to look at who was running congress, not who the president was. The president doesn’t control spending levels.

    3. I Make Money At H0me.Let’s start work offered by Google!!Yes,this is definitely the most financially rewarding Job I’ve had . Last Monday I bought a great Lotus Elan after I been earning $9534 this-last/5 weeks and-a little over, $10k last month . . I started this four months/ago and immediately started to bring home minimum $97 per/hr

      Heres what I do……………………………………………… More INformation Here

  2. I have it on good authority from some very smart lefties that the president is in charge of spending.

    1. “Congress—and in particular, the House of Representatives—is invested with the “power of the purse,” the ability to tax and spend public money for the national government.” – history.house.gov

      All Bills for raising Revenue shall originate in the House of Representatives; but the Senate may propose or concur with amendments as on other Bills.”
      — U.S. Constitution, Article I, section 7, clause 1

      No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law; and a regular Statement and Account of the Receipts and Expenditures of all public Money shall be published from time to time.”
      — U.S. Constitution, Article I, section 9, clause 7

      All spending originates in Congress. The President sends Congress his Budget (wish list) but the House and Senate make the bill. The President then has the “power or the pen” he may sign the spending bills into law, or veto them. Congress can overrule the veto by 2/3rds vote
      Congress shoulders more of the blame than the President.

      1. Everyone knows it’s you screech you lying sack of shit.

        1. Your intelligence and knowledge shine through in your post. Prove one thing I said wrong. It is all out there, public knowledge.

          1. Now; go back and run spending with a R vs D majority. You’ll fall off your chair and have to eat your previous words. It’s no secret that the D party is all about commie money (federal spending).

  3. Reason’s really been dropping the ball lately. It’s been days since they’ve published an article defending Big Tech’s right to censor its users. Step it up, Reason!

    1. It’s been about 10 hours.

    2. If they’re private companies then why not? You don’t like it use other platforms. Why is it when it comes to tech companies and social media conservatives think they should be able to tell them how to run their businesses. God damn big gubmint Republicans.

  4. Someday there will be hell to pay. It could spell the end of America as a nation championing freedom and independence. But as Irving Kristol said, “it’ll take a long time, and, meanwhile, it’s still possible to live well.”

  5. My art is my profession and makes…READ MORE

  6. Interesting opinion.
    Thank you so much.

  7. Can we cue up reemys “raise the debt ceiling” rap?

  8. Enforcement mechanism. What are creditors going to do if we don’t? Refuse to loan us more? Oh no, whatever will we do without more loans.

  9. If there were term limits there would be more politicians willing to take unpopular positions on spending and get it under control. Neither party is serious about it unfortunately. The GOP loves to preach about it when Dems are in power,but for whatever reason doesn’t do anything when they have power. Dems will talk about the debt if they think it’ll make the GOP look bad. Obama reduced the deficet and Bill left office with a surplus at least. Trump spent like a drunken sailor before Covid hit even.

    Trump’s ideology is whatever he thinks will get him selected and/or fire up his base. His supporters don’t see to care. He could cum on your wife’s face and his supporters would insist it’s sunscreen and he’s saving her from cancer. I’m scared his deligitamizing the election is going to lead to violence. His supporters believe everything he says, and when he screams fraud if he loses the election his supporters will do whatever he tells them. It’s looking like Moscow Mitch, Romney the Mormon coward, Lindsey “you can use my words against me” Graham and other Republicans won’t stand up to him. We already know Mormons are willing to destroy the country. I’m afraid the GOP leaders are too. Send all the mormons to the gas chambers!

  10. Single Mom With 4 Kids Lost Her Job and..READ MORE

  11. “When you have this much unemployment, when you have this much-underutilized capacity; this is the time when the government has got to be the spender of last resort.”

    I have heard of a lender of last resort, but never a spender of last resort. Is this some kind of post-Keynesian economics where the government not only drives supply but also demand?

  12. Would a female President be able to break through the glass debt ceiling?

  13. If a sociopath had control of nuclear weapons and a money printer, would he/she ever have a budget?

  14. By 2030, assuming there is still a country here, the debt will be well past $40 trillion and headed to $50 trillion…no problem. Fake money spends just as well as real money. The debt will never be paid down as Congress has no plans to acquire any responsibility for anything and that includes the debt. When the socialist Dems finally take control…as the saying goes…you ain’t seen nothing yet. The new green fiasco will double the debt…no problem. This is the plan since global warming is riding the propaganda wave. Except for one little fact…we will be in a mini ice age by the end of the decade. Sorry liberal global warmist alarmists…the sun trumps your crappola every time.

  15. It is NOT a matter of “paying it back”. Spenders argue that it never has to be paid back… and historically, they are right. The debt just grows and grows. So please stop making that argument, even if it might be correct in some scenarios.

    The problem is not that it has to be paid back, but that it has to be rolled over. Continually.

    Unless the debt is financed with perpetual bonds, a significant part comes due each year and new bonds have to be sold just to keep the same level of debt.

    And if buyers can’t be found, the whole pile collapses. This is what happened in the credit panic of 2008.

Please to post comments

Comments are closed.