If you hate numbers, stop reading.
If you have anxiety, definitely stop reading.
We are about to peer into the pit of despair. But think of it as a learning experience.
According to the Peter G. Peterson Foundation, which monitors the U.S. National Debt, on March 1, the gross federal debt of the United States surpassed $28 trillion. (That’s 12 zeroes; 1 trillion is 1,000 billions or, more startling, it is one million millions.) Although the debt affects each of us, it may be difficult to put such a large number into perspective and fully understand its implications.
The $28 trillion gross federal debt includes debt held by the public as well as debt held by federal trust funds and other government accounts. In very basic terms, this can be thought of as debt that the government owes to others plus debt that it owes to itself.
“So what” you ask?
America’s high and rising debt matters because it threatens our economic future.
According to the foundation, the coronavirus crisis has accelerated an already unsustainable fiscal trajectory, both because of its devastating effect on the economy and the necessary legislative response. When the health crisis is finally under control (and this week seems to indicate we are heading in that direction), it will be important to understand where our nation stands in its fiscal outlook and work together to implement sustainable solutions that promote economic stability in the years to come.
Plus, we are hearing other big numbers being kicked around as investments toward “relief.”
According to an article in Reason written by Zach Weissmueller and Justin Monticello this week, Congress has doled out more than $4 trillion in response to the COVID-19 pandemic. The U.S. National Debt represents about $67,000 per citizen, surpassing the country’s annual Gross Domestic Product for the first time since World War II.
On the current path, the Congressional Budget Office predicts that the debt would grow to 102% of GDP by the end of 2021, to 107% by 2031, and 202% by 2051. It also predicted that by 2051, the federal government will be spending more than a quarter of its annual budget just to pay interest on the principal. (Those estimates came before President Joe Biden signed the $1.9 trillion COVID-19 relief bill, which made the long-term budget outlook even worse.)
According to the Reason article, fiscal hawks have been sounding the alarm about rising debt levels for decades, though their nightmare scenario of runaway inflation hasn’t come to pass. But it might, and it could happen sooner rather than later. And it could get a lot worse before it gets better.
Economist and New York Times columnist Paul Krugman wrote in a December piece, “Learn to Stop Worrying and Love Debt,” that, “It’s a completely safe prediction that once Joe Biden is sworn in, we will once again hear lots of righteous Republican ranting about the evils of borrowing.”
According to Weissmueller and Monticello, Krugman is right. “Republicans have been complicit in ballooning the debt going back to the Nixon administration. But scoring rhetorical points about GOP hypocrisy doesn’t address the question of whether or not America’s debt … is cause for concern,” they write.
As the pandemic emergency passes, “the political parties will continue to do their cyclical thing: ‘Your deficits are bad. My deficits are good,’” Alan Viard, an economist at the right-leaning American Enterprise Institute, told the Christian Science Monitor this week. The economy is ripe.
According to the article, interest rates have fallen to near record lows, making the cost of borrowing virtually free. That could prove a boon, especially if the money is spent on investments, such as infrastructure, that can grow the economy in the future.
“Investing in better roads, bridges, dams, electrical infrastructure, all of that stuff, clearly, those investments pay returns over a long period of time,” says Leonard Burman, a professor at Syracuse University’s Maxwell School in New York. “Investing in better education, if you can do it, pays returns over the course of decades.”
Plus, the slow recovery from the Great Recession has convinced many economists that the U.S. didn’t enact enough stimulus at the time.
So is the number too big to matter to us anymore? Absolutely not. In context, within 10 years, the federal government will spend nearly as much on interest payments as it does on research and development, infrastructure and education combined.
We need to demand policies that put the nation on a better fiscal foundation. Because at the rate we are going, it will be generations before we can invest in ourselves in any meaningful way.
Go to www.usdebtclock.org to see the numbers for yourself (and to boost your anxiety a bit).