As talks continue on Capitol Hill over how to spend the taxpayers’ money, our government inches closer and closer to a record 22 trillion dollars in debt, and it only looks worse from here. Republicans talk of propping up our already inefficient defense spending, while democrats talk of expanding social security and medicare. Of course we also have not begun to feel the cost burden of onsetting retirement of the baby boomer population. It seems like both republicans and democrats don’t care about the debt, so let me remind them some consequences of our continuous reckless spending.
For one, as I pointed out in an article for the Daily Signal a while back, the scariest part of the debt debacle that we find ourselves in is the growing amount of interest that needs to be paid on top our debt. Interest payment on the debt is projected to eclipse spending on Defense by 2027. That’s right. We’ll soon spend more on something that provides no service to us, than we will on our military. The ultimate “tipping point” however is when we reach the point where we can no longer manage to pay off more than the totality of our interest payments. If we reach that point, then the government will have no choice but to raise taxes on everyone, cut indiscriminately into our spending, and/or inflate its way out of debt. The other option, of course, is bankruptcy.
That’s a longterm view, maybe not scary enough for some people, so lets talk about the immediate consequences of our debt. As the Peter G. Peterson Foundation points out, our national debt has significant impact on economic growth (which, in a quick lesson for those who don’t know, is reflective of income growth, among other things). Not only this, but the CBO also projects our increasing debt will eat into our incomes (found in the same articleSpecifically, it limits our investment spending (both private and public), a key driver of economic growth and innovation.
Of course, the longer we sustain such debt, the less likely creditors are to keep interest rates at their current levels. And with the Fed pursuing a stringent monetary policy, interest rates on our debt will likely rise, so we can expect interest payments to become even more of a burden on our debt.
Our government must stop reckless spending and reform our entitlement programs. Tax increases alone will not get us out of this mess.