A new year dawns bright, with the US hurtling over the fiscal cliff. The lame duck Congress voted for a pork‐packed $1.7 trillion budget bill. As the saying goes, it’s only money!
At a time of enormous domestic need, RepublicanSenate leader Mitch McConnell pushed an extra $45 billion for Ukraine, declaring that Washington’s “number one priority” was supporting that nation. Kentuckians might wonder if their Senator had moved to Odesa, Kharkiv, or Lviv over the holidays.
Alas, this appropriation was small change compared to the overall “defense” (in fact, mostly for offensive operations) budget. Congress hiked military outlays to record levels, topping off the already‐bloated Biden spending program at $858 billion. American taxpayers remain stuck subsidizing prosperous, populous Europeans, superfluous Middle Eastern monarchs, and cheap‐riding Asian defense dependents.
Unwilling to raise taxes as it also shovels ever‐more cash into social programs old and new, Congress simply borrows additional money as if loans need not be repaid. The publicly held national debt hit 100 percent of GDPand is heading toward the record of 106 percent set in 1946, at the conclusion of the worst war in human history. Within a decade the US faces trillion‐dollar deficits for as far as government analysts can budget. By mid‐century the Congressional Budget Office expects the debt/GDP ratio to run around 185 percent. And that assumes policymakers don’t do anything stupid, like approve massive new spending programs without paying for them. Which, unfortunately, is as certain as the rising of the sun.
Endless borrowing isn’t cheap. Over the last decade interest payments as a share of GDP jumped abouta quarter. And the era of (almost) free money is over as the Federal Reserve pushes up rates to wring inflation out of the economy. The budget agency’s estimates are daunting: “Combined with rising interest rates, large and sustained primary deficits cause net interest outlays measured as a percentage of GDP to more than quadruple over the period: They rise from 1.6 percent of GDP in 2022 to 7.2 percent in 2052.”