The Patriot Post® · Hey Pal, Can I Borrow $40 Trillion?
In the 1975 classic “Monty Python and the Holy Grail,” Sir Lancelot charges into Swamp Castle and kills a number of guards and wedding guests on his way to what he thinks is saving a damsel in distress. The king of the castle eventually calms things down, introducing Lancelot to his distraught guests. “This is supposed to be a happy occasion,” proclaimed the king. “Let’s not bicker and argue over who killed who.”
I do love my Monty Python references, and for some strange reason, that’s what came to mind when I read news about the national debt hitting $40 trillion yesterday. No one actually solves anything or makes a terrible situation right. Neither side will touch the entitlements that drive our debt.
They just bicker and argue over who spent what.
The U.S. debt doubled from $20 trillion in September 2017 to $40 trillion today. Put another way, we’ve accrued as much debt in the last nine years as we did over the first 241 years of our history.
Un. Be. Lievable.
“We’ve got to get rid of the $19 trillion in debt … fairly quickly,” Candidate Donald Trump promised in 2016. Oops.
The U.S. didn’t pass $1 trillion in debt until October 1981, and back then, President Ronald Reagan said, “If we as a nation needed a warning, let that be it.” Some may say that Reagan’s defense buildup while cutting taxes is what set us on the current course. That’s false, but even if it were true, Reagan won the Cold War by out-arming the Soviet Union, and he did it with a federal budget that didn’t even reach $1 trillion until 1987.
This year’s federal budget is $7.4 trillion, with a $1.9 trillion deficit. In one year.
I don’t know about you, but I don’t feel like we’re getting seven times the good governance that we did in 1987.
Obviously, our warnings about COVID spending were correct: That “emergency” binge represented a new floor for federal spending, and Congress has never looked back.
$40 trillion is nearly impossible to comprehend. But Elon Musk recently reached $1 trillion in personal net worth. If the government confiscated every penny of that and put it toward the debt, it would merely cover the annual interest, which is now the third-largest line item in the federal budget.
The entire U.S. GDP is $31 trillion, which brings me to the perennial question: Is our economy at risk of imploding because of this debt load, and how high is that risk? We’ve been asking that question for a long time, and the answer is unclear.
Here’s why it matters: Deficit spending, especially over the last five years, has been at the root of inflation. Since Joe Biden took office in January 2021, cranking spending into high gear, cumulative inflation is above 27%, and on many items, it’s much more.
The practical effect is that the spendthrifts in Congress and the White House are blowing money they haven’t even printed yet, and it’s as if they’re stealing straight from your wallet. Inflation raises prices, and Treasury securities make credit more expensive. You foot the bill for the profligacy in Washington.
I mentioned entitlements, and by that, I meant the big ones: Social Security, Medicare, and Medicaid. Two of those are earned, meaning that we taxpayers spend our whole lives paying into the system from which we are supposed to receive a return. Yet it doesn’t work that way in practice.
It’s not popular with current retirees to say so, but workers like me are paying that bill right now. Meanwhile, if I had been allowed to privately invest that 6.2% (or 12.4% with the employer portion) from my paycheck over the last 30 years of my working life, I’d have a heck of a lot more money than what might await me from Social Security — if it’s still even there when I retire. But I’m not bitter.
Social Security now consumes nearly $1.4 trillion annually, or 22% of outlays. Medicare is another $955 billion, or 15%. Add Medicaid’s $598 billion (9.5%), and you’re getting close to half of the federal budget on those three programs.
Despite the complaints of Democrats and the Leftmedia, we do not have a tax cut problem. Yes, two Republican presidents have signed major tax cuts in the last quarter century, but over that time, tax revenues as a percentage of GDP averaged near 17%, higher than the historical 15% average over the last century.
Spending, on the other hand, has risen from roughly 17% in 2001 to about 23% today, after peaking at 30.5% in 2020. Federal outlays have exceeded 20% of GDP every year since 2015, except in 2018, when outlays were 19.9%.
Clearly, we our elected representatives have a spending problem.
Things will continue on the same path until they can’t. Yes, the government has been able to maintain the facade so far, but that can’t go on forever. When it can’t, it won’t.
That will be the ultimate price of having deviated so far from the limited constitutional Republic our Founders bequeathed to us 250 years ago.