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America’s national debt is increasing at a staggering $1 trillion every 100 days. While both parties recognize the issue, both refuse to take any real steps to address it. Why?
From The Telegraph. An economic specter haunts America. It’s also one that many American politicians — Republican and Democrat — say a great deal about but are reluctant to address.
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The name of that shadow is the United States National Debt: what the US Treasury Department defines as “the amount of money the Federal Government has borrowed to cover the outstanding balance of expenses incurred over time.”
If you go to the Treasury’s website, you can see just how big that debt is. In mid-May, it was 34.5 trillion dollars. The pace of the growth in that debt is equally stunning. Approximately 1 trillion dollars is being added to America’s National Debt every 100 days. …
The truth is that the rapid growth in America’s National Debt is driven by two factors. The first is spending on major entitlement programs like Social Security, Medicare, and what is called Income Security (for example, unemployment benefits).
Taken together, these programs constituted 68 per cent of Federal Government spending in 2023. …
The second factor at work is that US government tax revenues aren’t covering government spending. In 2023, the federal government collected almost 4.5 trillion in revenue, but spent 6.16 trillion. …
These problems are well-understood by legislators on both sides of America’s political divide. Back in October 2023, a bipartisan group of Congressmen proposed creating a bipartisan federal debt commission to try and address the challenge. But for months, this proposal has struggled to gain traction. Why so?
One reason is that legislators from both parties have few incentives to tackle the problem. It’s hard to see, for instance, how significantly reducing the pace of the national debt’s growth (let alone diminishing the national debt’s size in real terms!) can avoid making substantial reductions in entitlement programs. …
Anyone even suggesting that spending cuts are unavoidable would face an electoral backlash from these sizable segments of the American electorate. …
Then there is the revenue side of the equation. Democrats insist that any national-debt reduction must involve tax-increases. They regard this as essential if they are to sell expenditure reductions to their constituencies. In response, Republicans point out that tax increases will suck more capital out of the private sector, thereby diminishing productivity and growth. …
America’s political class consequently chooses to live in a fiscal unreality. Yes, that may save their political skins. In the long-term, however, the specter of America’s National Debt’s profound dysfunctionalities will darken more and more of America’s economy. In that world, there are no winners.
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(Excerpt from The Telegraph. Photo Credit: P_Wei/Getty Images Signature)