The Cato Institute recently published an article titled “A Federal Shutdown Is an Annoyance — Interest on $22 Trillion in Debt Is a Problem.” This report highlighted the problem that is our growing national debt. Democrats seem concerned about funding a $5.7 billion wall while not even flinching at the $263 billion that was paid on U.S. interest in 2017. What will it take for either party to deal with our huge national debt?
Federal spending has been increasing dramatically since about 1993. From 1993 to 2000, spending increases by 3.1%. In the next decade, it rose by about 6% from 2001-2006 and 8.5% from 2007-2010. While this spending spree occurred, the national debt shot from 35% of GDP up to 78.8% of GDP in 2018. This percentage is expected to increase in the coming years as well.
Increasing spending so dramatically and quickly obviously is not healthy for the economy. As debt increases, interest paid on debt must increase as well. This causes a larger share of the federal budget to be dedicated to paying interest rather than paying for programs, other expenditures, or instead of financing tax cuts.
President Trump and most Republicans seem to have as little concern for the growing debt and amount paid on interest as Democrats do. According to the Congressional Budget Office, net interest on public debt increased by 19.4% between the last quarter of 2017 and 2018.
The amount paid on interest will continue to grow at an accelerated pace if the national debt is not dealt with. As the debt increases, so will net payments on interest, which will lead to more debt, which will again lead to more interest. We will be caught in a vicious cycle if the federal government does not deal with the problem soon. Although debt theoretically can be rolled over again and again to future generations, if interest rate on debt surpasses economic growth, we will run into a problem.
Ultimately, Congress must deal with this problem. Whoever the president may be, he or she has little power over the budget. Even if he vetoes a spending bill, Congress can override it.
It seems no one but truly fiscally conservative individuals seem to understand the danger of a unbridled growing debt. Congress should lead the way and pass truly balanced budgets to avoid the dangers of paying even higher interest on our national debt.
Dallin Overstreet is the Senior Policy Research Fellow at the American Freedom Institute