In last week’s column, I noted that the Congressional Budget Office (CBO) projected the fiscal year 2019 federal budget deficit would be $960 billion.
After the piece went to press, the CBO released the actual figures for the fiscal year that ended Sept. 30. They are significantly worse than what was projected — $984 billion, $24 billion more than what was projected.
For the 12-month period, the federal budget deficit increased by 26 percent, compared to the previous fiscal year. That’s not good news. Nor is the fact that the deficit, which last year accounted for 3.8 percent of the gross domestic product (GDP), now accounts for 4.6 percent.
Interest on the national debt is the fastest growing line item in the federal budget. In the last three years, annual interest paid on the national debt has increased by 57 percent, despite low interest rates.
On Aug. 29, 2012, at the Republican National Convention, Paul Ryan declared this in his acceptance speech after he was nominated to be the Republican vice-presidential candidate on the ticket headed by Mitt Romney: “In this generation, a defining responsibility of government is to steer our nation clear of a debt crisis while there is still time.”
That was true then. It is true today as well. It is also something that today is pretty much ignored by our elected leaders on both sides of the aisle.
So why are budget deficits something about which we should be concerned? One reason is that interest payments on our national debt are siphoning off funds that could be used for other purposes, among them education and improving facilities for the men and women who serve our country in uniform.
Another reason is that, by running up huge deficits during a time of prosperity, our government is left with little leverage to offset the costs of the next economic downturn. Conventional wisdom holds that during those times we should be running up budget surpluses (as was the case from 1998 through 2001) to offset the deficits when the economy tanks (as happened in 2008.)
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But, you say, isn’t the national debt simply money that we owe to ourselves? That is only partially true. There is, for example, a temporary surplus in the Social Security Trust Fund that has been lent to the federal government to help finance the national debt. That, however, will be needed to pay Social Security benefits for the growing number of baby boomers who are retiring. The Social Security Trust Fund itself is facing insolvency just a few years down the road.
Some of the treasury bills sold to finance the national debt are held by pension funds, whose beneficiaries have every right to view them as their money, not money that belongs to the general public.
And some of the treasury bills sold to finance the national debt are held by foreign investors who are not particularly concerned about the well-being of Americans (apart from the fact that bad things happening here could diminish the value of their holdings).
As of June 2018, the most recent time that the U.S. Treasury Department released information about the value of foreign holdings, the Chinese government and Chinese investors owned $1.18 trillion of our national debt, while Japanese investors owned $1.03 trillion. That’s a pretty good-sized chunk of our future that is in foreign hands.
Meanwhile, the silence on both sides of the aisle in Congress is deafening. Is there no longer anyone who cares about budget deficits and the risk they pose to our country?
Does the American public no longer care about the well-being of our children and grandchildren?
Are folks, living only for the present, just fine with burdening our children and grandchildren with a crushing burden of debt that will significantly limit their chances of experiencing the prosperity that many today have been privileged to enjoy?