Happy New Year!September 30, 2020 -
Categorized in: IAG News
New Year’s Eve is one of those holidays that sneaks up on me every year since I stopped working on Capitol Hill. It is difficult to believe another year is slipping away at 11:59:59 pm tonight when the federal government closes its books on one of the most extraordinary budget years in our country’s history. Tomorrow morning we start a brand new budget year.
When we began this budget year on October 1, 2019, the world was a different place.
The Congressional Budget Office (CBO) projected that the federal government would take in about $3.4 trillion and spend about $4.4 trillion, leaving a projected annual budget deficit of around $1,000,000,000,000.
In March and April Congress and the President approved spending trillions of additional dollars to offset the economic collapse created by COVID-induced shutdowns. Thus, CBO now anticipates that Congress overspent its income by a record $3.3 trillion this year.
This annual overspending is simply added to our cumulative national debt which now totals $26,810,898,511,924.31 (about $81,000 per person).
Americans in general have become more accepting of debt over the years. Coming out of the Great Depression most Americans saw debt as a potential threat to their future livelihood. Now debt is an accepted tool for buying otherwise unaffordable depreciating assets. Often the question “Can I afford the monthly payment?” replaces “Do I really need that?”
At least most loans or credit cards have minimum monthly payments that pay down a small portion of principal with each payment. The federal government has not made a principal payment on its debt since 2000. In fact, it essentially pays the monthly interest on its debt by borrowing more money from its lenders.
For those who have struggled with debt, you know what starts out as manageable can grow into unmanageable over time. The path to financial success becomes narrower and narrower as your debt payments consume more and more of your income. Your personal economic ecosystem becomes increasingly fragile and unexpected shocks pose a much higher level of risk to your personal financial stability.
The same is true for our country. An ever-growing national debt slowly and effortlessly backs policymakers into a corner. While they could make small(er) adjustments now to retain more options for future shocks, it is much easier to continue the path we are on by spending more, taxing less, and creating money.
The good news is that our country has not painted itself into a corner yet. The question is how long after the pandemic has passed will we choose to stop painting.
Quote of the week: Thomas Jefferson: “To preserve our independence, we must not let our rulers load us with perpetual debt. We must make our election between economy and liberty, or profusion and servitude.”
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