Recently, much of the national political debate seems to focus on government spending. Stimulating the economy, reforming health care, fighting a war — nothing’s cheap. In fact, it’s incredibly expensive.
It’s easy to get lost in the mind-bogglingly large, constantly changing figures. Hundreds of billions here, a trillion there — who can keep track? Besides, why not just spend as much money as we feel like? It’s for getting people health insurance and jobs, and the rich can afford to pay up, right?
However tempting this happy fantasy may be, this path is a sure way to eventual disaster. The soaring national debt isn’t only a concern of those doom-mongering balance-the-budget-or-else types; it’s a nationwide threat.
One of the chief obstacles to resolving this issue is people’s basic confusion about the terminology of fiscal policy. In a given fiscal year, the budget deficit is the difference between the amount of money the government takes in and the amount it spends during that year. The national debt, on the other hand, is the sum of all the budget deficits and surpluses ever, or the total amount of money that the government owes.
So when a politician says he’s going to reduce the budget deficit, he doesn’t mean what you might think. Sure, the government will spend less money, but it will still be losing money every year and adding to the national debt.
The only way to actually reduce the national debt is to consistently have budget surpluses — for the government to bring in more money than it spends. Apart from a brief spell of surpluses during the Clinton years, the federal government has been in the red since the 1950s.
The resulting national debt has reached staggering levels; it peaked at 108 percent of gross domestic product (GDP) during World War II and has never dropped below 22 percent of GDP since then.
But past deficits pale in comparison to the colossal expenditures of the Obama administration. The budget deficit for fiscal year 2009 (which ended in September) was $1.42 trillion, more than three times the record (set in 2008). In the next ten years, a projected $9.1 trillion more in deficits will be added to the national debt.
Already at around 70 percent of GDP, the national debt is expected to rise to over 100 percent within the next three years.
“So what?” you might ask. “Obama may be spending a lot of money, but so did Bush, and for that matter, almost all his predecessors.” In the long term, however, government spending will undergo completely unsustainable growth, not because of how much Bush spent on Iraq or how much Obama spent on the stimulus, but because of mandatory spending.
Mandatory spending is funding for “permanent” appropriations — money that the government must spend, regardless of whether it can afford to. This includes entitlement programs such as Social Security and Medicare, as well as interest on the mushrooming national debt.
Without comprehensive reform, mandatory spending will exceed total tax revenue in the 2030s. This means Congress will have to borrow money for defense, law enforcement, education, etc., adding to the deficit and the national debt.
Regardless of one’s preference for Obama’s deficit spending or for Bush’s, our current fiscal path is simply not sustainable. In the short term, massive spending on the economy has made deficits skyrocket. In the longer term, entitlement spending threatens to completely bankrupt the nation.
