Ticktock: Congress needs to get serious about the ever-expanding national debt
SALT LAKE CITY — Congress needs to get serious about stabilizing the national debt, which is growing even faster as inflation heats up, says a financial reporter.
As of March 31, 2022, the U.S. Treasury’s official figure for the debt of the federal government is $30.4 trillion, which means $91,406 for every American, according to Just Facts.
For contrast, in October 2008, the national debt was $10 trillion.
Eric Boehm, of Reason magazine, has details on a new report from the Congressional Budget Office. It warns that lawmakers in Washington, D.C., need to start slowing the U.S. debt now or suffer severe consequences later.
The CBO estimates that the federal government will add another $12.2 trillion to the debt by 2031, according to Boehm’s article.
National debt growing
He joined Inside Sources host Boyd Matheson to talk about grabbling with the debt and what inaction will inevitably bring.
In politics, Boyd pointed out, the party out of power talks about getting spending under control. And the party in power spends and spends.
“It doesn’t matter whether it’s Democrats or Republicans, we’re equal opportunity offenders there,” he said.
Tipping point of the national debt
Boehm said the CBO report released last week stated the size of the debt is as large as the whole U.S. economy. Or, 100% of the Gross Domestic Product (GDP).
“Basically, the CBO says, ‘Look, lawmakers have to get serious about this by 2026 if they want to have any chance of holding the national debt level at 120% of GDP,” Boehm said.
Boehm said that number — 120% — is a point of no return.
“It’s a figure that a lot of economists suggest is a threshold that really you can’t go past because you end up having all sorts of negative economic consequences,” he said.
“History doesn’t bode well for countries that once they get past that 100%, 105% of GDP. It just rarely seems to end well,” Boyd pointed out.
“We’re sort of in uncharted territory here. We’ve never really seen in modern times a country the size of the United States go through something like this. Greece, of course, is sort of the one standout example. Their financial problems really began once that country tipped past 100% of the GDP,” Boehm said.
Interest never sleeps
Every dollar spent on the interest pays for debt on purchases the federal government made in the past.
Boehm said every dollar spent on the interest on the debt can’t be used to pay for government services for Americans. And can’t be put to more productive use in the private sector of the economy.
“That’s really where the problem is . . . as the debt gets larger, you end up with larger and larger interest payments, obviously, and that’s just dead money. It’s just money that comes out of the economy that is put to no productive use,” said Boehm.
In a move to slow the rise of inflation, the Federal Reserve anticipates raising the interest rate multiple times in 2022, without stalling the economy into a recession. The first hike in three years occurred in March.
Financial markets expect the central bank on Wednesday to announce a half-percentage point increase in the Fed’s benchmark interest rate, according to CNBC.
Boehm said rising interest rates will raise the cost of paying down the debt as well.
“That’s just money that’s going to finance the costs of stuff that the government already bought in previous years,” he said.
Inside Sources with Boyd Matheson can be heard weekdays from 1 p.m. to 3 p.m. on KSL NewsRadio. Users can find the show on the KSL NewsRadio website and app.
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