Spending is the Problem

Congress in the midst of another debt ceiling fight. House Speaker Kevin McCarthy and President Joe Biden have already met to discuss the issue. Joe Biden has announced that the debt ceiling must be raised, and he will not negotiate with Republicans on spending cuts. Meanwhile, several Democrats have endorsed a proposal to indefinitely suspend the debt ceiling.

This predicament resurfaced because the Federal Government has accumulated $31.4 trillion in debt. Rest assured, though, that we are witnessing just another round of political theater. Ultimately, the debt ceiling will be raised and there will most likely be no spending cuts. It is vital to remember that the national debt is not the core problem, but the symptom of reckless bipartisan spending.

Congress first introduced the debt ceiling in 1917 when spending was capped at $11.5 billion. The debt ceiling only exists to allow Congress to spend more money than it takes in. It provides the illusion of responsibility and enables deficit spending under the guise of this technical, Washington D.C. terminology.

The debt ceiling has been increased more than 75 times since the election of JFK. In 2013, Congress unveiled a new spending trick by simply suspending the debt ceiling. This was replicated three times in 2015. The current debt ceiling was set in December 2021. In just over a year, more than two trillion dollars were added to the debt.

In the last three years, Congress has spent staggering sums of money: $6.5 trillion in 2020, $6.8 trillion in 2021, and $6.3 trillion in 2022. These expenditures are trillions greater than the tax revenue collected in each respective year. As a result, the Federal Reserve’s balance sheet has doubled since 2019 to make up the difference.

The Federal Reserve, whose sworn duty is to protect the purchasing power of the dollar, has enabled Congress to spend trillions in newly created money which has resulted in record inflation. The Fed also determines the interest rate paid on government debt by setting the federal funds rate. While rates were held near zero, the interest payments on a $30 trillion debt were manageable even for our government.

However, the Federal Open Market Committee has increased interest rates for eight consecutive meetings. The current federal funds rate is between 4.50 and 4.75 percent. The cost of servicing the national debt has increased as a result and is now greater than $500 billion. By July, the cost is expected to be $700 billion.

Since October, the government has spent more than $313 billion on Social Security, more than $150 billion on Medicare, more than $175 billion on income security and more than $225 billion on other healthcare related items. By the middle of this year, the number of Americans enrolled in Medicaid is expected to be more than 100 million. These are all entitlement programs that the Constitution provides no mandate for. Yet even Republicans are defending themselves from accusations that they want to cut spending for these programs.

More than ten cents out of every tax dollar collected now goes towards interest on the debt. Until American voters are willing to accept reductions in a particular benefit they receive, or accept the complete elimination of their favored program, Congress will continue to spend this country into oblivion.

Something has to give.