President Trump, Republican and Democratic leaders in Washington, who never seem to agree on anything, have finally found some common ground. Unfortunately, what they see eye to eye on is yet another dramatic increase in federal spending that will drive the debt higher and further burden future generations.
The agreement announced this week raises spending by $320 billion over existing caps, allows the government to keep borrowing and avoids a government shutdown over the budget beyond the 2020 election.
“I am pleased to announce that a deal has been struck with Senate Majority Leader Mitch McConnell, Senate Minority Leader Chuck Schumer, Speaker of the House Nancy Pelsoi and House Minority Leader Kevin McCarthy on a two-year Budget and Debt Ceiling, with no poison pills,” Trump tweeted. “This was a real compromise in order to give another big victory to our Great Military and Vets!”
It’s true that the military is getting more money, and that satisfies Republicans. Domestic spending is also rising—up by $100 billion since 2017—which gives the Democrats something to crow about.
But where is all the money for this “grand compromise” supposed to come from? That’s the question our children and grandchildren should be asking, since we’re dumping the ever-expanding debt on future generations.
Consider this: The U.S. economy is growing at a healthy clip and the budget deficit for this year is still rising. It has already reached $747 billion and could top $1 trillion by the September 30th end of the federal fiscal year. The deficit is on pace to rise 23 percent from the previous year.
The debt has passed $22 trillion and is still rising, but policymakers do nothing. There is even one popular school of thought now that deficits and debt don’t matter as long as the economy keeps expanding.
But that ignores the growing bill for interest on the debt. This fiscal year, the federal government will pay about $480 billion just in interest. Those payments will continue to rise along with the increasing debt.
That’s billions and billions of dollars that could be spent on government services and infrastructure or simply returned to the citizens in the form of lower taxes. Additionally, the Congressional Budget Office reports the consequences of the rising federal debt include dampened economic output over time and increased risk of a financial crisis if investors lose confidence in the U.S. Government’s fiscal soundness.
President Trump’s tax cuts helped generate stronger economic growth but they have not, as the administration predicted, paid for themselves. The New York Times references a CBO report that the decreased individual and corporate tax revenues combined with the additional interest payments on the national debt have added about $400 billion to the debt.
What’s more disappointing than the numbers themselves is the reticence of policymakers to confront the issue, and most won’t because there is no way to sugarcoat the facts.