Remember the TV commercial where the auto mechanic looks viewers straight in the eye and says, “You can pay me now or pay me later!” The message: If you change your car’s oil and filter every 5,000 miles, you can avoid a disastrous engine replacement down the road.
The same principle applies to our national debt. Congress can either take action to control spending and debt now, or watch interest payments swallow up our hard-earned taxes and starve needed programs. Ignoring massive federal borrowing will bite our grandchildren hard over the next few decades.
We taxpayers now owe more than $ 29 trillion to lenders, a third of which are foreign governments. Collectively, Japan, China and the UK own $ 3 trillion in US Treasuries. Debt could grow much more if President Biden’s $ 2 trillion âBuild Back Americaâ is added. According to the Congressional Budget Office (CBO), this would add $ 367 billion to the deficit over a decade.
This means that the obligatory interest payment on the debt will increase even more. For fiscal 2021, it is $ 413 billion.
In July, the Peter Peterson Foundation reported that over the next 10 years, without any change in current policies, the CBO believes that interest payments will become the fastest growing component of the federal budget. By 2031, it will consume 12% of the entire budget, leaving less money for existing programs.
It’s hard to believe, but America’s current debt is so high that it is greater than our annual economic output (gross domestic product or GDP) and it is larger than the size of the economies of China, Japan. , Germany and India combined, Peterson reported in March.
The problem worsens over time, as six in ten tax dollars go towards paying fees, including social security and medicare. Benefit spending increases as more people retire and life expectancy increases. (Biden’s plan adds more rights.)
The problem is compounded by the fact that fewer workers pay social security taxes. For example, in 1950 there were 16 workers for every recipient of social security. In 2011, it fell to three and is expected to rise to two by 2030. Meanwhile, the CBO predicts that healthcare spending by all sectors of the economy – government, businesses and consumers – will reach 25% of GDP. by 2040.
Earlier this month, Congress passed its $ 1.2 trillion infrastructure spending legislation (highways, bridges, railroads, air and sea ports, broadband internet, and public transportation). The CBO has discovered that it is adding $ 256 billion to debt over the next 10 years.
Before Congress launches another new trillion dollar program, lawmakers must carefully consider the real long-term impacts of what we currently owe. Those we elect cannot simply reduce the money needed to run the program in the long term by adding timeouts to the new rights. In reality, the programs never stop.
While the president targets the super-rich and big business to raise taxes, it doesn’t generate enough money. The real fallout will be an avalanche of new costs that will befall all Americans, especially small businesses and middle class families.
Biden’s $ 2,000 billion âBuild Back Betterâ increases inheritance taxes that crush businesses and family farms, and lifts the ban on federal tax deductions for state and local taxes.
Congress must review money left over from previous COVID-19 legislation. According to usaspending.gov, at the end of September, Congress authorized $ 4.5 trillion in aid spending for COVID-19, of which $ 3.5 trillion has already been spent and another half trillion allowed to be allocated. That leaves another half a trillion unspent.
Ultimately, before our borrowing spirals get out of hand any more quickly, the impacts of debt must be a binding consideration of what Congress and the President conceive of.
Don C. Brunell is a business analyst, writer and columnist. He retired as president of the Association of Washington Business, the state’s oldest and largest business organization, and now lives in Vancouver. He can be contacted at [email protected]