June 5, 2023

The Debt Disaster

Is the Fiscal Responsibility Act truly a responsible way for Congress to act on behalf of America’s children? Is it truly transformative?

By Terence P. Jeffrey

Democratic President Joe Biden and Republican House Speaker Kevin McCarthy — both of whom are career politicians — made a deal this week. They agreed to let the federal debt increase without any limit whatsoever until Jan. 1, 2025.

For career politicians that date has special significance: It is after the 2024 elections, but before whomever wins those elections takes office.

It is a date designed to minimize debate over the debt in the days leading up to the election.

Republican Rep. Michael Cloud of Texas spoke to this point at a press conference the House Freedom Caucus held on Tuesday. “When we put a debt ceiling out there, we don’t even have the courage to put an amount on it, but instead we put it on a date in the middle of a lame-duck session, so that the American people will not be able speak to it in the next election — right before another president is elected,” said Cloud.

“That’s swampy games,” he said. “This kind of stuff has got to stop.”

Earlier this month — before Biden and McCarthy made their deal — the Congressional Budget Office put out a budget analysis based on the laws as they then stood. It said: “Deficits generally increase over the coming years in CBO’s projections, totaling $20 trillion over the 2024-2033 period. As a result of those deficits, debt held by the public grows significantly in CBO’s projections, rising from 98 percent of gross domestic product (GDP) this year to 119 percent in 2033 — which would be the highest level of U.S. debt ever recorded.”

McCarthy and the other members of the House Republican leadership put out a statement on Sunday explaining their deal with Biden.

“The American people elected House Republicans to stop the out-of-control inflationary spending that has broken family budgets,” the Republican leaders said in their statement.

“We cut spending year-over-year for the first time in over a decade while fully funding national defense and veterans’ health benefits, include the largest rescission in history by clawing back billions in unspent COVID funds, and achieve consequential work requirements to welfare programs to lift Americans out of poverty and grow the economy,” said the Republican leaders.

“The Fiscal Responsibility Act does what is responsible for our children, what is possible in divided government, and what is required by our principles and promises,” they said. “Only because of Republicans’ resolve did we achieve this transformative change to how Washington operates.”

But is this bill truly a responsible way for Congress to act on behalf of America’s children? Is it truly transformative?

The statement by the House Republican leadership did not spell out the full federal spending numbers their deal would result in or the amount it would increase the debt. Instead, it included a chart that is headlined ‘Stopping Democrats’ Reckless Spending,“ and carries the subhead "While Protecting Veterans and National Security.”

This chart shows the amounts the federal government spent on what it calls “Discretionary Spending Excluding Defense & Veterans Health” for fiscal years 2022 and 2023. It also shows the amount proposed for these functions in Biden’s fiscal 2024 budget proposal and what would be allowed by the Fiscal Responsibility Act, the legislation that would carry out the Biden-McCarthy deal.

No amounts are shown for the pre-COVID era before fiscal 2020.

According to this chart, the federal government spent $591 billion on discretionary spending excluding defense and veteran’s health in fiscal 2022 and will spend $625 billion this fiscal year. Under Biden’s budget proposal, according to the chart, the federal government would spend $722 billion on these functions in fiscal 2024. Under the Fiscal Responsibility Act, it would spend $583 billion — or $8 billion less than the $591 billion that was spent in fiscal 2022.

But what does America’s fiscal trajectory look like when you follow its path from the years before the pandemic?

In fiscal 2017, the federal government spent $3,980,720,000,000 and ran a deficit of $665,826,000,000, according to the Monthly Treasury Statement.

In 2018, it spent $4,107,744,000,000; and, in 2019, $4,446,611,000,000.

In 2020, the year the pandemic hit, federal spending jumped $2,105,263,000,000 to $6,551,874,000,000. That was a one-year spike of 47%.

That same year, the deficit was $3,131,917,000,000 — up from $984,388,000,000 in fiscal 2019.

In fiscal 2021, federal spending rose again to $6,821,554,000,000, and the deficit was $2,775,575,000,000.

In fiscal 2022, federal spending dropped to $6,271,600,000,000 — but that was still $1,824,989,000,000 (or 41% more) than the last pre-pandemic year of fiscal 2019.

Yet, in the chart the Republican leadership published with their statement on the debt-limit deal, they used “Discretionary Spending Excluding Defense & Veteran’s Health” from fiscal 2022 as their baseline.

In fiscal 2022, when federal spending is categorized by function, the largest expenditure was not for a discretionary item but for Social Security — which took $1.219 trillion. In fact, according to the Monthly Treasury Statement, Social Security together with Medicare ($755 billion) and net interest on the federal debt ($475 billion), absorbed $2.45 trillion in fiscal 2022 — or 39% of all federal spending.

The Census Bureau published a report this month on how America’s population is aging as children represent a declining share of the population and people 65 and older represent a growing share. In 2000, according to this report, individuals under 18 represented 25.7% of the population and those 65 and older represented 12.4%. By 2020, those under 18 had dropped to 22.1% of the population and those 65 and over had risen to 16.8%.

In recent decades, America has seen a shrinking birthrate. In 1910, according to data published by the Centers for Disease Control and Prevention, there were 30.1 babies born in the United States for every 1,000 people in the population. By 1933, during the Great Depression, that had dropped to 18.4. By 1947, at the height of the Baby Boom, it had risen back to 26.6. By the beginning of this century, however, it had dropped to 14.4.

In 2021, it was 11.0.

“The baby boom generation (born 1946-1964) and millennials (born 1982-2000) — the two largest U.S. cohorts in 2020 — both continued to age over the past two decades,” said the Census Bureau report. “At the same time, smaller cohorts of children were born from 2010 to 2020.”

These smaller cohorts, it appears, will eventually have to sustain a bigger government than their predecessors did.


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