January 30, 2023
As of this writing, the national debt stands at more than $31 trillion and it’s growing fast. Yet our fiscal budget deficit fell sharply in 2022.
The national debt continued to rise because the government continues to spend more money than it receives in revenues. And the deficit fell sharply because federal spending to fight COVID-19 declined significantly, but it was still large. The shortfall declined to $1.375 trillion compared to 2021’s deficit of $2.776 trillion. That’s quite a fall, but it could’ve been more if different policy choices were made.
Is there a limit to this budgetary madness?
The size of our debt is a reflection of the growing mismatch between spending and revenues. When the federal government spends more than it takes in, it must borrow to cover the deficit. Each year of borrowing is adding up quickly.
In the past, we’d run deficits for emergencies, like wars. Now we run deficits to support aging baby boomers, rising health costs, and a tax scheme that continually underfunds what the government has promised to citizens. Let’s look a bit deeper.
The aging population that’s living longer than generations past means we must prepare for the financial realities of a longer retirement. There are 10,000 people in the U.S. who turn age 65 every day and that will continue through 2029.
Health care is one of our most important issues. It represents 20% of our economy and is the second-fastest growing part of the budget. But our health system is also a big problem. It’s the most expensive in the world yet does not provide overall better health outcomes than less-expensive systems.
Finally, our tax laws consistently produce inadequate federal revenues. There isn’t enough money to cover obligations. The rapidly growing imbalance between revenues and spending leads to greater annual deficits and more debt.
These three items are the largest drivers of our debt. But soon interest on the debt will be up there too.
Currently we pay $965 million in interest on our national debt every day. In 10 years, it will be nearly triple that.
Asking again, is there a limit to this madness? Yes – once lenders lose confidence in buying our federal debt. The craziest part about this is nobody talks about it.