Federal deficits, once a hot topic that dominated policy conversations and election year advertisements, has receded to its traditional place as a bottom-shelf issue. For shame. But a new Congressional Budget Office report highlighting the potentially disastrous consequences of our long-term debt trajectory could be enough to shake the cobwebs off of one of the largest moral issues of our time.
The issue hit its peak immediately following the recession, when more than a trillion dollars was thrown into supposedly “shovel ready” projects. And it was sustained by the collapse of several European welfare states, Greece among them, which seemed to prove that investors would only tolerate so much.
“Americans are left to wonder: Could we one day find ourselves at the epicenter of such a crisis?,” wrote Rep. Paul Ryan in 2010. “Could a European-style debt crisis one day happen right here in the U.S.? The answer is undoubtedly ‘yes.’ And the sad truth is that inaction by policymakers to change our fiscal course is hastening the day of reckoning.”
After years of inaction it proved difficult to sustain momentum, particularly since more immediate problems like jobs, wages, and health care, rose to the fore. Fortunately, Republicans never let the fiscal debate die and worked diligently to whittle the deficit down from $1.4 trillion in 2009 to $438 trillion in 2015.
It hasn’t been enough.
“At 77 percent of gross domestic product (GDP), federal debt held by the public is now at its highest level since shortly after World War II,” the CBO writes in its latest Long Term Budget Outlook. “If current laws generally remain unchanged, the Congressional Budget Office projects, growing budget deficits would boost that debt sharply over the next 30 years; it would reach 150 percent of GDP in 2047. The prospect of such large and growing debt poses substantial risks for the nation and presents policymakers with significant challenges.”
That debt is the result of federal deficits more than tripling over the next three decades, soaring from 2.9 percent of GDP to 9.8 percent by 2047. That rapid increase is fueled mostly by exploding entitlement costs, the result of Baby Boomers heading into retirement and facing rising healthcare costs, as well as interest payments on our expanding debt.
The impacts of this rapid increase are potentially dire.
“The amount of debt that is projected under the extended baseline would reduce national saving and income in the long term; increase the government’s interest costs, putting more pressure on the rest of the budget; limit lawmakers’ ability to respond to unforeseen events; and increase the likelihood of a fiscal crisis.”
In plain English, this means that as the federal government is forced to borrow more money, investors will increasingly purchase Treasury securities rather than invest in the private economy. This will crowd out private investment in capital goods (computers, factories, etc) and dampen economic growth, while also giving the government far fewer tools to stimulate the economy and stem a crisis.
President Trump’s recently released budget would not have even put a dent in this enormous fiscal challenge. He proposed budget cuts of $54 billion, a relatively meager sum that was immediately decried by liberals as an immoral attack on Americans.
“President Trump released his proposed budget outline for 2018 on Thursday,” Jeff Spross wrote for The Week. “It is, in a word, evil. Let me repeat: This budget is evil. It presents a demented vision of what priorities the federal government should invest its resources in.”
It could be argued that budgets are moral documents insofar as they reflect the priorities of an administration. But what is often forgotten is the profound moral implications of deficits. Jay Cost writes for The Weekly Standard:
One purpose of our governing charter is “to secure the Blessings of Liberty to ourselves and our Posterity.” Debts that are imposed upon the next generation should be incurred for the purpose of securing the blessings of liberty to them. . .
By this standard, our federal budget is a reprehensible failure. No doubt, the federal government does plenty of things that interest future generations, but this explains at most a fraction of our annual shortfall. The preponderance of our deficit is due to purely political considerations. Namely, it is easier for politicians to win reelection if they distribute government benefits to voters that are in excess of tax burdens. The gap can safely be pushed off to future generations because they are not yet eligible to vote.
That’s to say nothing of the utter immorality of growing interest payments, i.e. taxpayer dollars that are being used to reward investors rather than used to advance the cause of America’s at risk populations.
Hopefully the CBO’s latest report will once again raise the profile of our national debt and deficit. Unless dramatic changes our made to our budget, much more than even President Trump is contemplating, future generations will be left with a bill they’ll inevitably be unable to pay.