Two Trillion More in Debt*

Richard ManningSeptember 30, 2023

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The professional point-missers in official Washington, D.C. are focused this week upon the supposed “looming government shutdown” declaring apocalyptic doom to anyone who will listen. Fortunately, those who take these prognosticators of the status quo seriously are becoming few and far between.

A September 3, 2023 Washington Post article by Jeff Stein headlined, “U.S. deficit explodes even as economy grows” outlines the shock that liberal economists have that the supposed full-employment of Bidenomics has generated neither a savings on social welfare spending nor an increase in revenues.

And even with the splash headline of the deficit “exploding”, few people in institutional D.C. or academia as a whole get the problem – America is on an unsustainable spending path and it is irresponsible to just kick the can down the road for even another year.

The 2011 Medicaid expansion under Obamacare is just one example of why the deficit continues to balloon counter to liberal economist expectations. The consequence of expanding eligibility for what was intended as an indigent health insurance program from a 200 to 300 percent of poverty level in all but seven states, is that the number of enrollees have increased from 56.2 million to 84.7 million (2021.) This is more than a 50 percent increase in eligible participants, and this does not count Covid caused increases which the Kaiser Foundation estimated brought the rolls to 92.3 million at the end of 2022.

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The end of the COVID emergency will result in some of the new enrollees being removed from eligibility as the income standards that were suspended in 2020 were restored in April of this year, but the Biden administration is already hassling states which are seeking to enforce these income eligibility standards with threatened lawsuits.

Medicaid was supposed to provide safety net health coverage for the poor. Instead, due to the decade old change, now a family of four making $90,000 annually is eligible, and the pressure is on for the seven holdouts to join the spending party.

The cost of this one program has skyrocketed to an estimated $608 billion, an $87 billion increase since 2021. (Note that the increase is not solely related to Obamacare created increased eligibility standards.)

This is just one program, but it is emblematic of the increased dependency society and the resulting federal fiscal damage wrought by them.

But the poison built into the system is the escalating interest payments on the debt which are expected to top $660 billion for 2023 when all the bills are paid.

Every American is aware that interest costs are going up on consumer spending, whether it be mortgages, car loans or personal bank loans. The interest that the market demands to be paid to purchase U.S. Treasury bills is also increasing, creating a self-fulfilling financial tsunami for the future.

To put this into perspective, we currently have a $33 Trillion national debt. Federal government accounts (social security trust fund for example) along with the Federal Reserve make up an estimated $13 Trillion of this debt, meaning that $20 Trillion is the approximate debt held by the public (other countries, banks and savings bonds/T-Bills.) In an April of 2023 report, the St. Louis Federal Reserve analyzed the make-up of the current debt and estimated that higher interest rate costs will increase the amount owed by $98 billion in calendar year 2023.

Believe it or not, this estimate is likely low as the overall national debt grew significantly larger than their projections driving interest owed upward with it.

For perspective, the federal Office of Management and Budget projected the entire Department of Homeland Security to spend $100 billion in Fiscal Year 2023. The increases in the interest payments on the debt effectively equal the entire expenditure for Homeland Security. And the Congressional Budget Office projects that interest payments on the debt will climb from a projected $663 billion this year to $1.4 trillion in a decade if nothing is done.

Rather than being ridiculed, those fighting to get federal spending under control should be hailed as heroes.

In a fiscal world where failure is not an option, most of our federal elected representatives would prefer to kick the can down the road until there is nowhere to kick it.

At the very least, Congress should commit to additional cuts to federal spending by the equivalent of the next year’s interest payment increase. Maybe they would understand the corrosive nature of the escalating budget deficit and do something about it, before the only solutions are default or massive cuts to Social Security and other massive automatic pilot spending programs that consume about 70% of the current federal expenditures.

*(Note on headline – the federal government will spend approximately $2.1 Trillion more than revenues received in FY 23, however, reporting may claim that the deficit number is $1.7 Trillion due to the Supreme Court reversal of the Biden student loan debt cancellation of $400 billion that was counted in the FY 2022 deficit as an expenditure and is now an FY 23 accounting credit.)

Rick Manning is the President of Americans for Limited Government.

Cross-posted with The Daily Torch

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