The federal government’s debt is spiraling out of control. The COVID-19 pandemic didn’t help matters, but it also isn’t the sole cause according to the latest projections released by the Congressional Budget Office (CBO) on Wednesday, September 2. At the pace the national debt is growing, when the government’s fiscal year ends at the end of September, it’ll equal the size of the US economy for the first time since World War II.
Monumental challenges and difficult decisions are on the horizon for the nation. The debt cannot be ignored for much longer. Yet, politicians on each side of the aisle continue to spend massive amounts of money.
For two decades, the national debt has been surging. It’s expected the federal government’s deficit will hit $3.3 trillion this year. To put it in perspective, June’s deficit was more massive than every annual budget deficit during George W. Bush’s presidency. This year, it will be three times larger than the deficit in 2019. And by 2030, the CBO estimates that the national debt will grow to 108% of the US economy.
It doesn’t take a rocket scientist to understand that it’s unsustainable to spend more than you bring in.
What’s Driving the Deficits
A deficit occurs when there’s a gap between what the government spends and how much it collects. It’s no different than balancing your household checkbook.
It’d be easy to blame the nearly $8 trillion in combined spending between the Federal Reserve and Congress on the COVID-19 crisis. The pandemic didn’t cause the problem, however, it did help to accelerate it.
That are several factors driving the out of control debt:
- While the government incurred debt during the pandemic, tax revenues dropped significantly as the governors shut down their economies to combat COVID-19.
- Congress didn’t reduce spending in the wake of the 2017 tax cuts.
- Health and retirement costs are rising rapidly, and social security and Medicare are facing insolvency soon.
- Federal entitlement programs account for 50% of all federal spending and are the main drivers of the national debt.
No Serious Problems, Yet
The nation’s debt isn’t having a significant impact on the economy, yet. The US is still able to borrow money easily, and investors haven’t gotten spooked. Interest rates are expected to remain low.
In the wake of the debt following World War II and the Great Depression, Congress passed balanced budgets for nearly 10 years to get it under control. It’s questionable if politicians in Congress today will have the courage to make big decisions until there’s a crisis, and they’re forced to deal with it.
By Don Purdum, Freelance Contributor
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