Congress Admits It Has a Debt Problem, but Will It Do Anything?
Servicing debt grows more expensive as the deadline to curb the spending spree gets closer.
You know a problem is looming when even Congress starts paying attention. That problem at the moment is the ever-metastasizing national debt and the endless federal budget deficits which feed its growth. Of course, acknowledging the danger posed by a problem isn't the same as doing something constructive to address the issue.
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Agreement on a Problem, but Not a Solution
"The national debt has reemerged as a paramount economic issue for the first time in nearly a decade, raising alarms from Congress to Wall Street. But even with all the outward drama, there's little evidence that Washington is ready to stem the tide of red ink," Politico's Eleanor Mueller and Victoria Guida wrote this week. "In interviews with a dozen members of both parties on Capitol Hill, even GOP lawmakers acknowledged an inability to reach consensus within their own ranks on the path forward. Democrats want to focus on raising taxes, not spending reductions — and some don't agree that deficits are an urgent issue at all."
National debt now stands at $33.7 trillion. "Over the past 100 years, the U.S. federal debt has increased from $404 B in 1923 to $33.17 T in 2023," the U.S. Treasury Department helpfully offers in an explainer that's already out of date. That's in constant 2023 dollars—yes, adjusted for inflation. That $33.7 trillion represents 123 percent of gross domestic product, a measure of the size of the entire U.S. economy.
"Comparing a country's debt to its gross domestic product (GDP) reveals the country's ability to pay down its debt," adds Treasury.
That's because the national debt is borrowed money on which interest must be paid. The more money borrowed, the more lenders are needed. If those lenders fear that borrowers —governments included—are accumulating so much debt that they may not be able to make good on their obligations, they demand higher interest rates to offset the risk. That's what's happening.
Borrowing Gets More Expensive
"Americans aren't the only ones feeling the pinch of higher interest rates," CNN reported last week. "The US government is shelling out way more money to cover interest payments on the national debt these days."
In fact, the federal government is now spending more on gross interest payments on debt than on national defense. In October, the first month of the current fiscal year, the Treasury paid $88.9 billion in interest to service debt, while military programs cost $83.4 billion.
Eventually, lenders may walk away if the market becomes oversaturated and/or if the perception of risk exceeds people's comfort levels.
"Overseas buyers who were once important sources of demand—China and Japan in particular—have become less reliable lately," warn The Wall Street Journal's Chelsey Dulaney and Megumi Fujikawa. "Meanwhile, supply has exploded. The U.S. Treasury has issued a net $2 trillion in new debt this year, a record when excluding the pandemic borrowing spree of 2020."
To lure lenders back, the U.S. government may have to pay even higher interest rates. That means debt payments will take up an ever-bigger chunk of the budget and start squeezing out everything else on which money might be used beyond footing the bill for past expenditures. Eventually, though, you run out of the ability to pay and people's willingness to lend. Then, even a seemingly solid institution (in some eyes, anyway) such as the United States federal government can find itself on very shaky ground.
20 Years To Fix the Problem (If We're Lucky)
"Under current policy, the United States has about 20 years for corrective action after which no amount of future tax increases or spending cuts could avoid the government defaulting on its debt whether explicitly or implicitly (i.e., debt monetization producing significant inflation)," Jagadeesh Gokhale and Kent Smetters of the University of Pennsylvania's Penn Wharton Budget Model forecast in October.
That's the model's "best case" scenario. The authors caution that if market participants lose faith that the U.S. government will get its financial affairs in order, the time frame will be much shorter. And that brings us back to Politico's warning that there's "there's little evidence that Washington is ready to stem the tide of red ink."
With federal lawmakers at odds over whether to address deficits and debt with tax hikes, spending cuts, or just to let it ride in hopes they'll die before it becomes an issue, the current genius-level idea is to off-load responsibility to a commission. The commission can propose fixes and take the blame for imposing some degree of discipline, legislators hope.
"Today, U.S. Senators Joe Manchin (D–W.Va.) and Mitt Romney (R–Utah) introduced the bipartisan Fiscal Stability Act to strengthen America's fiscal health and stabilize the nation's finances for future generations," the two senators announced November 9. "The legislation would create a bicameral fiscal commission tasked with finding legislative solutions to stabilize and decrease the national debt."
Both Manchin and Romney plan to retire from Congress next year, which amply demonstrates just what sort of future lawmakers anticipate for anybody who tries to rein in the spending spree. The White House is already suggesting the commission proposal is a scheme for cutting Social Security and Medicare. It certainly should be that, among other things, given the huge portion of the federal budget, and its financial woes, those programs represent. But there's lots of political gain to be found in promising people the gravy train can continue forever, and not much reward in pointing to reality.
Higher Taxes May Not Be an Option
Another limiting factor for lawmakers who like to buy goodwill and votes with goodies is that there's only so much you can squeeze from the public in taxes. In 2011, Nick Gillespie and Veronique de Rugy pointed out for Reason that "since 1950 annual federal revenue has averaged 17.8 percent of GDP, fluctuating within a relatively narrow range. Despite endlessly creative attempts to squeeze more dollars out of taxpayers, the feds haven't been able to pull in much more than that on a regular basis." Federal Reserve Bank of St. Louis data says that hasn't changed since, topping out last year at 19 percent.
That constrains lawmakers' options even as the deadline for getting finances under control comes ever closer.
"Frankly, unless we have truly extraordinary economic growth, we're headed for a pretty bad outcome," Rep. Brad Sherman (D–Calif.) told Politico. "You need revenue, you need to deal with spending, you need to deal with entitlements — and you need to wonder whether democracy is capable of doing any of that."
It's good that Congress is finally acknowledging that decades of deficits (every year since 2001) and spiraling debt is a looming problem. Whether anything will be done to fix the problem is another matter.
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The US is a highly leveraged country with an unsustainable lifestyle, particularly when it comes to government spending.
We’re also paying for salaries and pensions for Ukrainian government officials, and also finding their education system.
Since the 1960s the debt has roughly doubled every ten years.
So expect a national debt near $66T by 2033. Think that’s nuts? They made a big deal out of adding a digit to the debt clock during Saint Reagan’s reign, and that was because the debt was cresting a mere single trillion. At that time nobody could even conceive the idea of a $33T debt, yet here we are.
The electorate likes being bribed by politicians with their own money? Who would have thought that?
Oh wait, Alexis de Tocqueville did.
What’s the likelihood that Congress will do something to rein in the growing (metastasizing) American debt? 99%+
What’s the likelihood that Congress will decrease spending to match government income? < 1% [this would make too many people “unhappy”]
What’s the likelihood that Congress will take steps to increase the government’s income to match what they want to spend? ~10% What’s the likelihood that efforts to increase the government’s income by increasing taxes will have any long term effect? 0.0% (C’mon man – once taxes get “high enough”, how do you make someone take a job and go to work rather than just recline upon one of our several “constitutionally mandated” safety nets?)
What’s the likelihood that the printing presses will dialed up full turbo-speed (the “Weimar” setting on the press control box)? 99.99% By this means the gargantuan national debt can be progressively whittled down to almost nothing,but in the process there will be no use for (or room enough to store enough) bills of less than $100 denomination to purchase anything but a piece of bubble gum, and it will take a whole handful of those to “have it your way” at your local Buggery King, and a trip to grocery store will require bales of bills. (For those who like analogies $100 = new 1¢ equivalent.)
Remember Congress’s motto: Après nous, le déluge,
Now, some of you (nit-picking white supremacy types, no doubt) may have noticed that the percentages quoted above do not equal 100%. Whachew mean? Haven’t you heard of core-competence math, the principle of no answer is wrong if you really mean it, or even modern monetary theory? We will now all join our voices in a chorus of “Weimar, Baby, here come! Right back where we started from.”
Somewhere I have one of those $100 trillion Zimbabwe notes. Those guys must be rich, so let’s ask them what to do.
Just because it’s been fun hurtling down the hill toward the canyon, it doesn’t mean gravity won’t win once you go over the edge.
M to F trans soccer player breaks female opponent’s knee, subsequent opponents forfeit out of fear for safety. Trans player wants to sue for discrimination:
“What caused the fear? A female soccer player suffered a broken knee when blocking a shot from Francesca Needham, a 30-year-old man. They were afraid that if they took the field against Needham, they could be injured too.
Two matches in the Sheffield and Hallamshire Women’s League had to be canceled because of the boycott, according to the Daily Mail.
“At least four teams in a Sheffield women’s football league are boycotting matches after a club fielded a transgender player accused of causing a season-ending injury to an opponent,” The Telegraph of London reported Monday”
“Needham isn’t stepping down for good. He’s threatening to file a lawsuit over the matter.
“This unfortunate circumstance has prompted me to investigate pursuing a case of discrimination, as I believe it represents a breach of the code of conduct regarding diversity and inclusion, as well as safeguarding of adults in football established by both the Football Association and the Sheffield and Hallamshire Women and Girls League,” he said, according to The Telegraph.
So all a team has to do to win the championship without playing a game is hire a burly trans player, and all the other teams will concede?
If you want to win a championship without having to go to the effort of having to play at more than one match where the burly trans severely injures a woman, sure.
Well, you do have to permanently maim someone too.
Francesca Needham happens to be the team’s ballboy.
If he loses the case, will the team sack him?
If that happened and Francesca took it poorly, folks could say that he was being two teste.
Oh, nuts!
That’s just cocky.
It takes cajones to be a tranny on a girls team.
Congress is doing something about it: they are stepping harder on the gas pedal.
Always the best thing to do when going off the cliff.
The Thelma and Louise fiscal policy.
You know a problem is looming when even Congress starts paying attention.
100% disagree. They find plenty of fake problems to pay attention to. Kinda of the reason why libertarians exist.
Now back to the article
Tax increases without real spending cuts won’t help the debt situation. With no indication that Congress has any intention of reigning in ever increasing spending, any revenue increases would inevitably be overtaken by spending increases.
http://bastiat.org/en/government.html
Looks like that warning became a blueprint.
“Government ought to do much, but then it ought to take much.”
The whole crux of the matter is who defines what those “muchnesses” actually are. In a democracy, it is easy to rally support behind the benefits should be as extravagant as possible, and that the cost be as cheap as possible. The government “doing much” also tends to give carte blanche to the corrupt. The government already takes much, it just gives more.
There is also the little issue of the government that does much, will assert control over much. Generous government benefits should be resisted on principle for anyone with a mind to Liberty. Those benefitsalways come with a catch.
Most of what government does is move money around. The whole crux of the matter is that if it’s going to move a lot of money around, it needs to first take a lot of money. If it is going to move a little money around, it still needs to take the money first.
In our case it moves a lot of borrowed money.
The point is , it is taking a lot of money, and its appetite is insatiable.
Our appetite is insatiable. All politicians do is give people what they want. We want goodies and we don’t want to pay for them, so we’ve got a government that runs on deficits.
Yes, but trying to keep revenues up with potential costs is a fool’s errand. The former is finite, the latter is potentially infinite. Yiou have to have an electorate which has some self-disclipline.
“But as regards the third system, which partakes of both the others, and which consists in exacting everything from Government, without giving it anything, it is chimerical, absurd, childish, contradictory, and dangerous.”
You can tell from that statement that Bastiat was a leftist, because he’s saying that government should tax people. If he was a conservative he’d know that cutting taxes raises tax receipts, and a rate of 0% maximizes revenue.
Edit: Closing blockquote didn’t work so I used quotes. Weird because it worked on the first comment.
The reason blockquote doesn’t really work well is because browsers render it as an indented quote. If that tag occurs at the beginning of a comment, then the browser doesn’t know how the indenting happens so the whole comment gets indented and blockquoted.
At least I think that’s how it works.
test
test
Even better
Don’t know if that will work.
Yeah. Put it at the beginning and it does the whole thing.
Lol. You still don’t know what a fucking curve is and think it is the Laffer line. What an idiot.
Jesus H Christ you’re stupid. I’m not the one who claims that all tax cuts stimulate the economy. That’s you. Take your claim to its logical conclusion and 0% taxes raise maximum revenue.
It’s called a reductio ad absurdum argument. As in it is meant to be absurd in order to show off your stupidity. Not that you need any help.
Our ability to run on intergenerational debt is entirely about theft. We are able to create funds from thin air – and force someone else (the future) to pay those funds back.
It may be a lack of self-discipline that we don’t eliminate our ability to do that. But we’re not even able to talk about it
Theoretically government can maintain perpetual debt while only paying interest as long as the borrowing keeps pace with the economy. Unfortunately that’s not how our government operates.
Technically it’s not ‘borrowing keeps pace with the economy’. More like ‘tax revenues pay for interest plus, at times of financial crisis, principal payments when debt can’t be rolled over’.
No lender will allow kiting for even one payment. The nanosecond that happens, the money will cease to be a unit of account and that’s what hyperinflation really is.
We are already long past the point where future financial crises can be deferred. Realistically the entire purpose of the 1983 entitlement reform (where higher FICA taxes created a ‘trust fund’) was for those tax revenues to create a demand for Treasury debt every week or two (whenever paychecks get paid). THAT is what eliminated most financial crises for the last 40 years. Poor/middle-class people who pay FICA taxes (and foreigners who keep dollars for reserve) are what has kept the US govt afloat for that entire time. Not people who pay taxes quarterly or wait for capital gains ‘deals’ at year-end.
That change also created a ton of other changes. All of which increase corruption. None of which R’s or L’s understand. (D’s have a separate ‘failure to understand’ problem).
TLDR – Now that the entitlement funds are dwindling, we are gonna start having more and deeper financial crises. Those will create periodic principal rollover risk. And hence a tax revenue crisis. And the ‘solution’ here in the US will be increased corruption every single time a crisis gets kicked down the road. A macro level ‘borrowing keeps pace with an economy’ disguises the certainty of periodic crisis.
“Government is the great fiction, through which everybody endeavors to live at the expense of everybody else.”
You have to spend money to launder money.
Congress becomes aware of federal debt the way typical twenty-somethings become aware of personal debt: when the monthly interest and fees eat so much of their budget that it starts to hurt. We’ll see if Congress can act smarter than average young people, but I doubt it. Both will find another line of credit, and then maybe beg daddy for more money.
It hurts because they realize they’ll have to pay it back. Congress on the other hand just does another batch of “armed-theft” so the hurt never really gets acknowledged by anyone but the people.
What the problem??
$33T / 169M working citizens is only $200,000 / each.
Just pay the overlords your “fair share” and move on…. /s
When you have to borrow more money to make the minimum payments on your existing debt, technically you’re already broke.
“you need to wonder whether democracy is capable of doing any of that.”
No, we don’t need to wonder about that! Democracy does NOT have the capability of maintaining fiscal responsibility. Only Constitutionally-limited governments can maintain fiscal responsibility at any level. Many states, for example, have Constitutional provisions that forbid them from spending more than their revenues over time. Although that is not perfect, it makes those states much less irresponsible than the Federal government. Although we cannot avoid having a Treasury with the authority to print money and put it into circulation at this point in US history, it IS possible to mandate the stability of the value of money as the one and only goal of currency policy, with or without a Federal Reserve banking system. None of that is going to happen under the current mystique of “Our Democracy (TM)”
CNN’s Fareed Zakaria made an observation that Americans like Democratic government program and Republican level taxation. I will again make the case that government cannot expect people to accept cuts to programs that they are getting at bargain prices. If the American government would tax people at rates appropriate for the services, they receive people would be more inclined to accept that the programs are not worth the price. As long as people are getting services on the cheap they will continue to expect those services.
I don’t see raising taxes as a way to solve the problem by themselves, but rather a way to make people think about the value of the services and then to trim those services that are not of as much value.
It would only work if the debited services were treated as an individual/state/pertinent-group loan and the cost (‘tax’) went right back to the entities from which it was received. Ironically the very ideology of a free & just market society.
The very premise/purpose of collectivist mind-frames is to STEAL what some don’t want to earn by calling every product/creation a [WE] property/money while being just as lazy as possible and yelling ‘poor and helpless’ as much as possible to get ‘guns’ to steal for them.
It’s a race to the bottom (‘poor’) that actually encourages armed-theft as a living career and since armed-theft doesn’t create / produce anything its final consequence is a slum of criminals either doing genocide to save what’s left (German Nazi’s) or gunning down another nations resources (conquer and consume).
The armed-theft criminal mentality must be locked-up/punished to protect Liberty and Justice in order for any nation to survive else it’s just a race to the bottom.
Or summarized. ‘guns’ don’t make sh*t. Their only asset to humanity is to ensure Individual Liberty and Justice for all.
The problem is the consumers of services and the payers of taxes are two different groups. As long as people can vote themselves other people’s money, they will do so.