A rising national debt has been a fact of life during our entire lifetimes, but its trajectory has accelerated since the early 1980’s. Under both Democratic and Republican presidents, annual deficits have been particularly affected by unpaid for tax cuts, unfunded wars, recessions and the COVID pandemic.
In 2023, the national debt sits at over $31 trillion; the deficit in fiscal 2022 was $1.4 trillion.
Each year Congress votes to approve a spending bill of mandatory (e.g., Social Security, Medicare) and discretionary (e.g., national defense, education, transportation) items. And each year, separately, Congress votes to approve an increase in the debt ceiling, i.e., the total amount the government will have to borrow to meet any shortfall in revenues to cover the spending that has already been approved.
Over the years and sometimes down to the wire, Congress has voted each time to increase the debt ceiling to avert a default on our national debt, which otherwise would wreak havoc in the financial markets.
This year we are bracing for another showdown. Republicans in Congress have signaled that they will not authorize lifting the debt ceiling unless Democrats are willing to cut spending in entitlement programs. They make the cogent argument that our country cannot continue to increase our national debt without facing severe consequences at some point in the future. As of this moment, no details have been announced by the Republicans, who are unwilling to go public on cutting specific popular programs. And Democrats have indicated that they are not willing to negotiate cuts in spending on programs that have already been approved. In so many words, the Democrats are saying if Republicans are unwilling to raise taxes to cover already-approved spending, we should raise the debt ceiling to meet our obligations. So, a potential crisis looms.
Here are questions to consider:
· Is the current level of debt acceptable?
· Is there anything we can do to rein in mandatory spending?
· Are there areas of discretionary spending that could be reduced?
· Should taxes be raised and, if so, on individuals or corporations? Are there loopholes that can be plugged? Should large, profitable companies be required to pay a minimum amount of taxes?
· As the national debt continues to rise, is there a breaking point sometime in the future, especially if interest rates rise and/or the economy falters?
Here are links to background information on the subject:
Join us on Wednesday, February 15 at 12:30 pm and offer your thoughts on how this potential crisis is likely to play out and what Congress can do to avoid similar crises in the future.
Participants must register by Noon on February 14th to receive details on joining the discussion. The Zoom link will be sent out 24 hours before the event.