The non-partisan Congressional Budget Office (CBO) released a sobering report on Wednesday, reminding us that the $31 trillion in federal debt is a Sword of Damocles hanging over the heads of the American people.
The CBO estimates that the federal government will add a heart-stopping $19 trillion in debt over the next 10 years — $3 trillion more than previously forecast. And that’s if inflation doesn’t rise much more and the Federal Reserve keeps a handle on interest rates.
The federal deficit this year will be $1.4 trillion — a substantial increase from the $1 trillion projected in 2022. Over the next 10 years, deficits will average an eye-popping $2 trillion every year.
To put those numbers in context, the total amount of debt held by the public will equal the total annual output of the U.S. economy in 2024, rising to 118 percent of the economy by 2033.
Congress’s nonpartisan budget scorekeeper now projects that the U.S. economy will barely grow this year, after adjusting for inflation, and that the unemployment rate will rise above 5 percent, before growth re-accelerates next year. It attributes the slowdown in growth to the Federal Reserve’s campaign to tame inflation by raising interest rates, which is aimed at cooling the economy and the labor market.
Joe Biden is refusing to negotiate reductions in federal spending with Republicans if they try to hold the debt ceiling hostage. But if Biden keeps submitting budgets with $1.5 trillion deficits, how else can responsible politicians find a way to diffuse this debt bomb in our midst? How else can Republicans force the president to deal?
Democrats treat the federal budget as if it’s the holy of holies. Cutting anything (except defense spending) is against God’s commandments (or whoever the left is worshipping this week). To hear the yelps of indignation and the screams of anguish for wanting to cut the spending in federal programs that are out of control would be amusing if they weren’t serious.
The updated projections could supercharge a partisan debate between President Biden and Republicans over taxes, spending and the nation’s debt limit. Republican lawmakers are refusing to raise the limit — which caps the total amount of money that the federal government is authorized to borrow to fulfill its financial obligations — unless Mr. Biden agrees to steep but unspecified spending cuts. Mr. Biden has repeatedly said that he will not negotiate over raising the borrowing cap, which simply allows the government to pay for expenses that Congress has already authorized.
Republican resistance to raising the limit threatens to set off a financial crisis and recession if the government is unable to pay all of its bills on time.
Any “recession” has already been baked into the economy thanks to Biden’s $5.3 trillion in pandemic overspending, which has led to the Federal Reserve jacking up interest rates. To blame an economic downturn on Republicans is ludicrous.
But now that Republicans have rediscovered that the national debt is a threat to future generations, perhaps they will be able to take a stand and force Biden to make a deal on spending.
“If the debt limit is not raised or suspended before the extraordinary measures are exhausted, the government would be unable to pay its obligations,” the CBO said. “As a result, the government would have to delay making payments for some activities, default on its debt obligations, or both.”
Anyone who claims to know what will happen when the “extraordinary measures” have run their course is blowing smoke. We know that the “perception” of catastrophe will be bad enough; markets tanking, and bonds blowing up are some of the effects. But the overall effect on the economy is unknown, so to say we’ll slide into a recession is just a scare tactic.
But we very well might, which is reason enough to do our best to avoid it. For that, Joe Biden has to take off his blinders and see the world as it is, not as he and his Democratic friends wish it would be.
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