The nonpartisan Congressional Budget Office’s warning that projected payment on curiosity on the national debt had surpass defence spending and nondefense discretionary spending in July of last year sparked a wave of panic. And by 2046, that curiosity payment may surpass Medicare spending.
Just 14 months later, the cost of interest on our$ 35 trillion national debt has already blown past these two benchmarks, beating the CBO‘s projections by a staggering 22 years.
The$ 950 billion cost of borrowing accounted for the second-largest collection item of paying by our federal government in the fiscal year that ended this past September, following the$ 1.45 trillion spent on Social Security. At$ 896 billion, Medicare came in a close second. Our whole national defence budget, at$ 826 billion, was the fourth-largest saving group for fiscal 2024.
The financial aristocracy have come out for their biennial gags as debt hawks just in time for citizens to head to the surveys. They’re now pinky-promising that former President Donald Trump, the Republican candidate, would be worse for the federal debt than Vice President Kamala Harris, the Democrat standard-bearer.
But the statistics say then. Harris and her manager, President Joe Biden, entered office with financial and career development exploding as COVID-19 tailed off. After the 2020 COVID-19-induced republican spending spree, Biden and Harris defied prophetic cautions that the economy was in danger of overheating.
Instead, the federal government racked up a$ 2.8 trillion deficit for fiscal 2021, amounting to more than 12 % of that year’s economic output. Although that ratio briefly fell below 6 % in 2022, our deficit-to-GDP ratio has increased to roughly 7 %, the same as it was in 1946, when the government was repaying debt for a world war. The past two years of nearly$ 2 trillion subsequent annual deficits have brought this ratio to roughly 7 %.
The facts support Harris’s ongoing claim that our gap issue is being caused by inappropriate taxation. While Harris has criticized the wealthy with Trump’s 2017 Tax Cuts and Jobs Act, the federal income tax system has gotten more progressive: income tax payments to the top 1 % of earners increased by 19 % between 2019 and 2021. But more important, tax income has continued to surge even as the TCJA remains in consequence. The death of significant TCJA provisions, which may start expiring next year, will be left up to either Trump or Harris.
In other words, if Trump’s tax cuts created surplus tax revenue by boosting economic growth, then just changing those tax rates, particularly the corporate tax rate, which the TCJA made more aggressive overall, would probably reduce overall tax revenue rather than increase it.
Reckless paying must end.
The difficulty, simple to observe, is spending.
The federal government spent$ 6.8 trillion in 2024, 11 % more than in 2023 and, in nominal terms,$ 200 billion more than we spent in 2020, the actual year of the pandemic. Mandatory entitlement spending, which, to be fair, Trump and Harris are equally abysmal in their refusal to do nothing to curb, rose by 7 % in 2024 to nearly$ 3 trillion. Net interest payments on the loan, however, rose by 34 % in just one year. The sheer cost of debt comprised 12 % of all federal spending, up from 8 % in 2017.
Expansionary spending, below, is both cause and effect. The multitrillion-dollar ARP, Inflation Reduction Act, and coercive student loan cancellations triggered prices, which forced the Federal Reserve to increase interest rates while bond markets sustainably priced in the declining liquidity of national coffers. Biden and Harris ‘ excessive spending increased the rate of that saving as well as the sheer volume of loan that the federal government had already taken out.
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Trump’s spending was by no means liberal. Even before COVID-19, his government averaged a deficit-to-GDP ratio of 3.9 %, a little higher than the 3.7 % averaged between 1993 and 2022. But even with COVID-19, the state also took about$ 6 trillion of loan. Compare that to the more than$ 7 trillion that were spent by Biden and Harris despite having a recovering economy supported by vaccine development that has happened more quickly than ever in history.
The Trump and Biden-Harris data relatively speak for themselves, and on the gap, it’s no competition.
