by E. J. Antoni
The dust has barely settled from the contentious midterms, and the battle lines are already being drawn for the next legislative fight in Washington: the debt ceiling. With the nation at unprecedented levels of indebtedness, the choice in this fight is a stark one: a path toward stability or fiscal Armageddon.
If that sounds hyperbolic, consider the following facts about America’s finances.
Federal spending, which was already growing before COVID-19, accelerated at the outbreak of the pandemic like a rocket sled on rails. The debt has ballooned to almost $31.5 trillion, increasing $8 trillion in less than three years, an increase of more than one-third.
The national debt is more than 120% of the nation’s entire economy — something that did not even happen in World War II.
The exploding annual deficits and debt are the direct result of runaway spending by a profligate Congress and president with no regard for American’s financial security. In fiscal year 2019, federal spending was $4.4 trillion.
That grew to $6.6 trillion, $6.8 trillion, and $5.3 trillion in fiscal years 2020, 2021 and 2022, respectively.
Just to emphasize that the burgeoning debt is a spending problem and not a revenue problem, tax receipts are at a record high by any measure — in nominal terms, in real terms and as a percentage of gross domestic product. The government has never collected more money, but is still managing to spend it all, and then some.
And now, President Joe Biden’s Treasury Department wants to borrow even more than its $31.5 trillion limit and claims that a failure to raise this ceiling will result in a fiscal crisis. That assessment could not be more backwards.
The Treasury’s situation is the equivalent of a family maxing out all their credit cards and asking their lenders for additional credit without any promises of getting the family’s financial house in order. No lender in his right mind would agree to such a request from a borrower with an established pattern of irresponsible spending.
To illustrate just how hopelessly in debt the federal government is, if it were a private business, there’d be an unexplained fire there on a Saturday morning at 4:00 a.m. The fiscal crisis has already arrived.
Excessive borrowing is what got us here, and more of the same cannot get us out.
The claims about disastrous consequences from failing to authorize more borrowing are unfounded. There is no reason why the government cannot cut spending and live within its means, especially in a time of record tax revenue.
Under no circumstances should conservatives in Congress agree to raise the debt ceiling — this is a line in the sand. Nor can conservatives give in on statutory pay-go, legislation signed by former President Barack Obama which requires that Congress reduce spending today to help pay for their blowout budgets of the last two years.
Liberals decided to spend over a trillion dollars on “green” energy boondoggles and other handouts to their donor class, and now they must make budget cuts to pay for that. Conservatives would be betraying their constituents if those representatives went along with the Democrat-led push to eliminate statutory pay-go.
The short-term effect of raising the debt ceiling to accommodate more federal spending and borrowing would be more inflation – a hidden tax which has been robbing Americans of thousands of dollars annually for the last two years. To continue on that path is not only fiscally irresponsible, but fundamentally immoral.
But the long-term impact of the irresponsible financial status quo is even worse. Every nation which has gone down the path of perpetually escalating its borrowing has met the same end: total collapse.
We are too close to the fiscal cliff to risk inaction. Columbia is a big, old battleship, and she takes a long time to turn around.
Once the nation gets too close to the falls, the momentum is enough to carry her over the edge. There is no time to waste in altering course away from financial fatality.
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E. J. Antoni is a research fellow for regional economics at The Heritage Foundation’s Center for Data Analysis and a senior fellow at Committee to Unleash Prosperity.
Photo “The U.S. Capitol on American Currency” by Karolina Grabowska.