No assessment of the state of the union would be complete without acknowledging the country’s deteriorating budget situation and unprecedented fiscal challenges. Instead of ignoring high and rising national debt, our leaders must confront the situation and find ways to finance the future responsibly.
National debt is historically high. Gross debt surpassed the $20 trillion mark for the first time ever in 2017 and is currently $20.5 trillion. Debt held by the public stands at $14.8 trillion, or about 77 percent of the U.S. economy, which is the highest it has been since just following World War II.
$1 trillion deficits are just around the corner. The federal budget deficit in fiscal year 2017 was an ominous $666 billion, or 3.5 percent of the economy. Trillion dollar deficits are set to return permanently next fiscal year.
Policymakers are making the problem worse instead of fixing it. Recent legislation has only added to our budget problems. Legislation enacted since President Trump was sworn in is forecast to add $2.2 trillion to the debt by 2027, with the overwhelming majority coming from the massive tax cut bill signed in December 2017.
Debt will soon exceed the size of the economy. Debt is projected to reach 98 percent of the economy in ten years and exceed the size of the economy shortly thereafter. If all the temporary provisions in the Tax Cuts and Jobs act are extended, debt will reach 101 percent of the economy in 2027.
We will spend more on interest payments on the debt. Net interest payments are the fastest-growing part of the budget, and are projected to rise from $240 billion in 2016 to $878 billion in 2027. More of the budget dedicated to interest means less available for investments in areas such as education, infrastructure, or defense.
An increasing share of government spending is on autopilot. Today, 70 percent of the budget is mandatory spending not subject to the annual spending process and interest payments while 30 percent is discretionary (i.e. annually appropriated programs such as education, research, transportation and defense). Over ten years it will grow to 77 percent and 23 percent respectively.
Rising debt will be a drag on economic growth and standard of living. Failing to address the debt will result in higher interest rates, slower economic growth, greater burdens on future generations, and an increased chance of a fiscal crisis. The Congressional Budget Office estimates that average income in 2047 will be $5,000 lower if debt is allowed to rise than it would be if debt was put on a downward path.
We owe it to the future to fix the debt. Policymakers must put aside partisan warfare and work together to get the debt under control and eventually put it on a downward path. At the very least, our leaders must stop digging our fiscal hole even deeper by ensuring that any new initiatives are fully offset and do not add to the debt.