The Committee for a Responsible Federal Budget is raising the alarm about soaring federal debt and spending, which has ratcheted up in recent years even as the federal debt surpassed $30 trillion.
“In response to the COVID-19 pandemic and economic crisis, policymakers injected more than $5 trillion of fiscal support into the economy,” the group said in its new analysis. “Deficits ballooned from just under $1 trillion in 2019 to an average of $3 trillion per year over the subsequent two years.”
Meanwhile, the national debt has continued to explode.
“After two decades of uninterrupted borrowing – including three years in which deficits surpassed 10 percent of the economy – the U.S. national debt is higher as a share of Gross Domestic Product (GDP) than at any time since World War II and is on course to breach that record,” CFRB said. Yet policymakers have done little to contain our $24 trillion national debt, and most legislation has added to it in recent years. Additionally, there have been numerous claims that “debt doesn’t matter” and the United States should borrow even more than the $16 trillion it is projected to borrow over the coming decade. These claims are problematic and concerning.”
According to their estimates, it will only get worse unless something changes.
“CBO’s latest baseline estimates interest payments will exceed $8 trillion over the next decade,” CFRB said. “Rising interest rates could balloon these costs. For example, if interest rates are 1 percentage point above projections, interest payments would rise $2.4 trillion over the next decade to well over $10 trillion between 2023 and 2032; under this scenario, interest costs would reach a record 4.4 percent of GDP by 2032.”
The Committee laid out a laundry list of negative consequences for the soaring federal debt.
From the Committee:
- Threaten economic vitality: The recent surge in deficit spending has contributed to rapid near-term inflation and over time will result in higher interest rates, slower economic and income growth, and a small but increased risk of fiscal crisis.
- Place a strain on the budget: The federal government currently spends as much on interest payments as it does on most of our safety net programs combined, and interest is projected to become the largest government expenditure within the next 30 years. As interest and mandatory spending dominate a greater share of the budget, our government’s ability to invest in new priorities will be limited.
- Create geopolitical challenges and risks: With large portions of our debt held by foreign investors, a substantial share of our national income goes abroad. We are consequentially left with fewer financial tools to manage conflicts with other countries when they have increased leverage over our economy.
- Make responding to new emergencies more challenging: High deficits and debt – particularly if coupled with high inflation or interest rates – make it harder to borrow in response to a recession, pandemic, war, or other legitimate emergency.
- Are unfair to younger and future generations: The federal budget already favors consumption on seniors over investment in children. Failing to address rising debt also leaves future generations with an additional fiscal and economic burden.