With the election of Donald Trump, roughly half of Americans are hopeful, while the other half are dejected, if not alarmed and angry. While that may be a slight overgeneralization, we can probably all agree that the campaign leading up to the Presidential election was one of the nastiest in recent history, characterized by intense personal attacks, with little attention given to the many challenges our nation is facing. One such challenge is our exploding national debt and its dire implications for you and me.
As someone who has been a fiscal conservative all of my adult life, I was sorely disappointed to see such little attention given to the financial welfare of our nation. With our nation approaching $20 trillion in current debt, it should come as no surprise to anyone that a financial storm, like none we have seen, is likely in our future. Yet, neither Trump nor Clinton spoke much of our debt. When it was mentioned, it was simply noted in passing, with no plan by either candidate to halt, much less reverse, the current course we are on.
While it’s understandable that neither candidate was interested in tackling America’s festering cancer, what is alarming is the fact that many of the organizations who have typically decry our national debit, remained silent during the campaign. As the founder of the Chattanooga Tea Party, our organization locally, along with the national tea party movement, has consistently focused on fiscal issues over the last seven years. Likewise, the Republican Party has historically been the party of fiscal responsibility, if not in action, at least in words.
Yet nationally, both the Tea Party and the Republican Party said very little about the silence of both Hillary and Trump concerning our fiscal nightmare.
With reference to our national debt though, the old adage, ignorance is bliss, does not apply. In fact, choosing to ignore what is certain to cause calamitous events in the not too distant future, is akin to knowing one has cancer, yet discussion of the illness is avoided, hoping it will somehow go away.
So just how bad is our fiscal cancer?
Just as a picture is worth a thousand words, the following three charts illustrate the magnitude of our $19.5 trillion debt. To be certain the terms are understood, deficits are the annual differences between what our government takes in versus what it pays out, or spends. The gross debt is the cumulative sum of those annual deficits.
Chart #1: The Gross Public Debt from 1980 – 2016
Chart #2: The Federal Deficit from 1980 – 2016
Chart #3: Trillion Dollar Deficits Return by 2024
As the charts depict, for decades our nation has been spending well beyond its means. In fact, during the last two Presidential administrations, the US incurred an approximate $15 trillion of new debt, with nearly two-thirds of that amount being added during the Obama era.
According to an article at Visual Capitalist, our national debt is:
Larger than the 500 largest public companies in America.
Larger than all the assets managed by the world’s top seven money managers.
25x larger that all the global oil exports in 2015.
155x larger than all the gold mined globally in a year.
Larger than the sum of the world’s physical currency, gold, silver, and bitcoin combined.
But as troubling as this should be to any American, the future looks even worse according to the Congressional Budget Office (CBO) projections, as presented by the Committee for a Responsible Federal Budget. CRFB is a nonpartisan, non-profit organization committed to educating the public on issues with significant fiscal policy impact.
To quote CRFB, “under CBO’s current law baseline, annual deficits will return to trillion-dollar levels by 2024. Under a more pessimistic Alternative Fiscal Scenario in which policymakers fail to pay for new spending and extended tax cuts, trillion-dollar deficits return to 2021 and reach $1.5 trillion — a nominal-dollar record — by 2026.”
Despite the magnitude of our debt, there have been some who have suggested that our soaring debt is no big deal. Rather, they have asserted that debt is good, particularly when interest rates are at historical lows.
In contrast to that view though is that of Admiral Mike Mullen, former Chairman of the Joint Chiefs of Staff, who in 2011 stated,
“the single, biggest threat to our national security is our debt, so I also believe we have every responsibility to help eliminate that threat. A nation with our current levels of unsustainable debt… cannot hope to sustain for very long its superiority from a military perspective, or its influence in world affairs.”
Every budget is finite, even one as large as our federal government’s, which is now approaching $4 trillion per year. So as certain components of that budget increase, they either crowd out other line items or they demand greater borrowings to meet the shortfall caused by deficit spending.
Our nation has enjoyed historically low interest rates for a number of years. But when those interest rates invariably rise, so will interest costs. In fact, the CBO projects that those rising interest rates over the next ten years will increase the federal interest costs from $223 billion in 2015 to $839 billion in 2026. This will lead to fewer dollars available for other essential government programs, including the military, Medicare, Social Security, infrastructure and more.
Chart 4: Projected net interest expense, in billions of dollars & as a % of total outlays
So just how does a government that has an insatiable appetite for spending, and has shown no restraint to borrowing funds, affect ordinary citizens like you and me? Here are just a few of the ways:
Economic growth is threatened as national debt increases.
Wages are depressed and the availability of jobs is minimized.
The stability of Medicare, Social Security and Medicaid is jeopardized.
Personal costs of living increase as interest rates on individual credit ratchet up.
Burden for repayment of nation’s overspending today will be heaped on our children and grandchildren tomorrow.
As debt increases and spending accelerates, likelihood of another financial crisis increases, endangering personal wages, jobs, and investments.
As I mentioned at the outset, half of Americans are hopeful and even optimistic about what a Trump Presidency portends for the days ahead. But with great opportunity comes great responsibility. So as Republicans maintain control of both houses and gain the White House in January, how will they behave? Will they move the country forward in a manner that acknowledges the threat of our growing debt? Will Republicans guide our government and nation back in the direction of fiscal solvency? Or will their new found status in Washington reveal what they have done for too long now, campaign on grandiose promises that fall short on delivery?
Time will tell. But one thing is for certain, the longer our fiscal cancer is ignored, the more likely the ultimate diagnosis will be one from which we may never recover. If you care to weigh-in on this matter, be sure to let your Congressman and Senator know that you expect them to support plans that will move away from deficit spending and toward a balance budget. While it cannot be done overnight, the road back to fiscal responsibility must begin in 2017 under a Trump administration.
Addendum: While this article focused on the current portion of our national debt, there is a much larger amount that receives very little attention, referred to as the nation’s “unfunded liabilities.” These amounts total in excess of $100 trillion and represent the sum of the various obligations that will come due over the next several decades, predominantly made up of Medicare and Social Security, as the demographics of our nation continue to age out and draw more heavily on these programs. To find out more about this avalanche of debt, google “unfunded liabilities.”