Former Illinois Republican Sen. Everett Dirksen is credited with saying, “A billion here, a billion there, and pretty soon you’re talking real money.” Roughly 50 years later, the federal government’s spending binge has added some zeroes to its debts, and we now talk about liabilities in the trillions of dollars. The U.S. Congressional Budget Office’s latest budget and economic outlook does not inspire much confidence that the government will ever get a handle on its debts.
The CBO projects a budget deficit of $426 billion this fiscal year — $60 billion less than it estimated in March. The CBO’s budget outlook predicts annual budget deficits to remain a little under half a trillion dollars through 2018, then grow to $1 trillion by 2025.
In all, the CBO projects that the nation will add $7 trillion to the national debt over the next decade.
The national debt officially stands at about $18.3 trillion, yet this ignores many unfunded liabilities, and critics such as Boston University economist Laurence Kotlikoff contend that a full accounting of the nation’s liabilities and expected tax and other receipts reveal a gap of more than $200 trillion.
Debt held by the public will constitute about 74 percent of U.S. gross domestic product by the end of the year, which the CBO notes is “slightly less than the ratio last year but higher than in any other year since 1950.” This share is expected to grow to 77 percent of GDP by 2025.
“The growth in debt is not sustainable,” CBO Director Keith Hall explained. “At some point, it’s going to get to a very high level. Obviously, you can’t predict tipping points, but at some point this becomes a problem.”
Though self-serving politicians, ever eager to spend the public’s money, like to act as if debt does not matter, it has real consequences. Just ask Greece. Debt service payments, which will increase markedly if and when the Federal Reserve eventually bumps up interest rates, crowd out the private savings and investment that drive economic growth.
Like the Greeks, the U.S. government has racked up massive debts it will never be able to repay. A Greece-like blowup is not likely just around the corner, but it would be foolish to think that such an event could never happen here if we continue down this path.