Biden’s new spending proposals make previous annual budgets look like pocket change
Government Accountability Institute distinguished fellow Jason Chaffetz reveals the consequences of the Biden Administration’s new spending proposals:
While Washington, D.C., continually talks about new, additional spending, the question we should be asking is, how do we even pay for old spending? The interest alone on what we already owe is unprecedented beyond reason. While it would be nice to see interest rates stay low forever, they won’t.
As the Biden administration blankets America with “free” money, federalized infrastructure projects and promises to create irreversible new entitlement programs, it’s time Americans understood just how much that free money is going to cost them.
While both sides are certainly culpable for unfunded spending in recent years, President Biden’s new spending proposals make previous annual budgets look like pocket change. But it’s not just the spending that threatens to undermine our future prosperity. It’s the interest that could send us over the edge.
Nobody wants to talk about the tradeoffs associated with a $28 trillion debt. But at today’s rock bottom interest rates, we’ve been spending close to $400 billion a year in interest on our debt. In April and May this year, we paid more than $1.5 billion EACH DAY and the numbers are rising.
As economic conditions point to potentially rising interest rates, no one wants to consider what happens to those debt payments. Just as your mortgage payment can go up by a few hundred dollars with each 1% increase in rates, the payments on $28 trillion also go up fast. And at this point, interest rates have nowhere to go but up.
Think about this: a 1% increase in interest rates would leave us spending more on interest than we spend on Medicare in a year, according to data from the Committee for a Responsible Budget (CRB). A 2% increase takes our interest payments up above $750 billion a year. And a 3% increase, which is well within the realm of possibility, would leave us spending almost as much on interest as we spend on Social Security in a year.
Numbers this big can be mind-boggling. So think of it in terms of household share of that debt. Just the interest on our existing debt equates to $2,400 per year per household. Each 1% increase adds an additional $1,805 per year. So a 1% increase is $4,210 per household, according to CRB numbers. And that doesn’t buy us anything. It’s pure interest.
If that’s not scary enough, think about just how much more spending House Speaker Nancy Pelosi, D-Calif., and Senate Majority Leader Chuck Schumer, D-N.Y., have on tap for the rest of the Biden term. These numbers don’t include the $7.1 trillion in Biden’s 2021 budget proposal, or the $6 trillion he wants to spend in 2022. Consider that total revenues to the United States in 2020 (reflecting the booming Trump economy of 2019) came in at $3.42 trillion.
The Trump tax cuts and the rolling back of regulations led to increased revenue to the Treasury. Unfortunately, it was not coupled with a reduction in spending.
The problem doesn’t end there. The growth of that existing $28 trillion debt, along with whatever Biden piles on top of it, is expected to go from linear growth to exponential growth. That means the debt will double at fixed periods and ultimately become impossible to manage or reverse.
Democrats want to increase spending and increase taxes. That exacerbates the problem and never leads to balancing our nation’s books and paying off our debts.
As we spend those stimulus bonuses, unemployment checks, government grants and COVID funeral reimbursement funds, we ought to be thinking long and hard about the true cost of all this spending. We’ll soon be asked to pay for student loan forgiveness, government-run health care, Medicare expansion, Green New Deal provisions and child care subsidies – much of which will be irreversible once put in place.
Are we ready to take on the fiscal consequences of those long-term spending commitments? Is anyone talking about what those tradeoffs look like? We spend $1,500,000,000 per day on debt interest payments and get nothing for it. This is unsustainable.
Only the American people can fix this. Members of Congress reflect the demands of their districts. Until constituents demand spending restraint, or at a minimum stop penalizing it at the ballot box, we won’t see real change.
The only way out is for the public to demand and reward spending restraint. A constitutional balanced budget amendment is what we should be discussing as a nation.
Change for the better starts with each of us. If we don’t start cutting back on spending now, the consequences will be severe. In fact, we are already there.