I’m a grumpy old guy, and I’ve written many times that I’m worried about deficit spending and the federal debt rising to unfathomable levels. Pres. Joe Biden is recommending another $6 trillion in spending, boosting the debt even higher.
Biden is not planning to borrow the entire $6 trillion, of course. He wants to raise taxes on the wealthiest 1 percent of Americans to pay for some of it.
The reality is that he won’t get nearly enough in higher taxes to pay for his new programs. Congress won’t raise taxes that much and, even if it did, big businesses and wealthy people will find ways to avoid the higher levies. Count on it.
So, taxes will go up some, but Biden’s programs, if Congress approves them, will mostly be financed by printing money and borrowing.
There are some really intelligent people, far smarter and better educated than me, who argue somewhat convincingly that more borrowing isn’t actually a problem and the country’s massive debt is nothing to worry about.
They note that the U.S. economy is enormous and it can handle a hefty debt. They say interest rates are very low and we’re able to pay the interest to those we borrow from. They say debt is not yet crowding out funding for other programs. They say the ratio of debt to GDP has been higher at other times in history. They also say that the pandemic and resulting economic downturn demand a forceful response, even if it means higher debt.
I hope they’re right. Perhaps they are. If they’re not right, we’re in trouble. And they are making some big bets. They’re betting that inflation will stay under control and interest rates will remain low. They’re betting that the economy will stay strong and generate more tax revenue. They’re betting that the citizens, foreigners and countries (including China) who purchase our bonds will continue to have faith in the U.S. financial system.
If any of those things change, rough times are ahead.
Even most economists and politicians who aren’t much concerned about debt say we’re OK “for now,” or we’re OK “at these levels of debt.” Most don’t think we can go on forever printing and borrowing such huge amounts. Most agree that while big debt is necessary to combat an economic downturn, when the economy is strong, we should ease up on debt.
But we’re not going to ease up. Even when the economy has been strong, we’ve been borrowing immense amounts. It doesn’t matter which party is in control. To reduce borrowing, major entitlement program benefits would have to be reduced, and that is simply not going to happen. And, meanwhile, Biden wants to enact massive new entitlement programs.
I’m not against reasonable debt. Using debt to invest in infrastructure projects that will create future wealth makes sense. That’s what Utah does in modest ways. That’s like a family borrowing smartly to build a home or buy a car to get to work. And their budget can easily make the payments.
But the federal government is like a family that is borrowing to pay for day-to-day expenses like groceries, rent, clothes and entertainment. The family’s expenses are far higher than its income, so it borrows more and more every month. The debt escalates, interest payments rise, and the family has absolutely no ability to pay down the debt. This family is in serious trouble.
I believe that one of the most dangerous recent shifts in our national mindset is that the spending spree and exploding debt no longer seem like a problem. We’re not worrying about it. We’re a very tolerant people when it comes to unrestrained borrowing and spending. We’re beginning to believe that free money really does exist out there. After all, we got some of it.
Cranky old people like me complain, but citizens are seeing no harmful consequences. We’re now sending free money to families earning $150,000 a year. We’re sending billions of dollars to states like Utah that don’t need it and have to come up with imaginative ways to spend it. We’re providing so much assistance, including unemployment benefits, that many people don’t want or need to work. Restaurants can’t find employees. We’re going to be short of gasoline because refineries can’t hire drivers to deliver it.
We’re quickly developing the attitude that the federal government can create massive new programs and spend whatever is required with no consequence. More goodies. No pain. The feds will take care of each of us from cradle to grave. And borrow whatever is needed to do it.