MUST READ: Quiet Budgetary Cancer
America’s federal budget is confusing, to say the least. There’s mandatory spending, discretionary spending, security and non-security spending, advanced appropriations, interest on the debt, etc. It’s hard to keep it all straight. Yesterday, the Wall Street Journal dubbed interest on the debt ‘a quiet cancer.’
The Journal paints a bleak picture:
Without a change, in 10 years the federal government’s net interest bill rises to $928 billion annually. That would be 17% more than the government would pay to provide health care to the elderly through Medicare that year, and 82% more than the cost of all non-security discretionary spending programs combined.
Conversations regarding interest on the debt are usually reserved for professional budget wonks. It is rarely the subject of political stump speeches or the morning news. However, the implications of our growing debt, and the interest we pay on it, are stark. Again, the Journal:
A recent study of the debt sponsored by the National Academy of Sciences cites one credible projection that, by 2030, the U.S. could be transferring 7% of its entire economic output, or $2.5 trillion, to foreigners every year to service its debt.
The really sinister part of America‘s interest bill is that it just gets worse the longer Washington waits to act on the budget deficit. The math and the logic are simple and unavoidable. Big deficits require taking on more debt, which in turn adds to the interest payments required to service that debt. In short, it’s a Ponzi scheme.
It is highly unlikely that you will see a Congressional debate on this cancer, but you will see numerous proxy wars.
For example, today the Senate will vote on two spending cut bills – one is a good start and the other is a joke. Next month, House Budget Chairman Paul Ryan will release his budget, which should be a serious framework to rein in spending and enact real reforms. And sometime this spring, we’ll have a debate on the debt limit itself.
America – and its politicians – must get serious about its debt. As the Journal points out, the challenges are even greater than we realize.