This week, the House passed a bill to raise the debt limit linked to spending reductions that will slow the growth of government spending over the next 10 years. [See last week’s newsletter for more on that.] The bill’s passage increases pressure on President Joe Biden to end his brinksmanship and come to the negotiating table, rather than sticking to his demand that additional debt be allowed without reining in even one dollar in government spending. One of my colleagues on the other side of the aisle called the GOP effort “mean.”
 
What’s “mean” is passing off increasing debt to our children and grandchildren, which would result in a lower standard of living and increased national security risks in the future. The federal debt is more than $31 trillion, and increasing fast. But numbers that big are hard for us to comprehend. So let’s just look at the interest we are paying that amount.
 
More than half of that debt is owed to foreign nations, mutual funds, private pension funds, and insurers, among others. Japan, the European Union, and China each hold more than $1 trillion of it. These holders of US debt receive interest on that principal. In the government’s fiscal year 2022, the interest paid to those holding our public debt was $475 billion. Again, that’s just the interest paid out in a single year.
 
Although the concept is hard for people inside the Washington DC bubble to understand, money paid out as interest to the nation’s creditors is money that otherwise could have been used for vital functions to strengthen our nation. What else could the federal government have done with that money? I’m sure we would each have our policy preferences, but let’s look at an example.
 
The interest paid out just in 2022 could have doubled the budgets of each of the following government agencies:
 
  • Homeland Security (securing the border, preventing terrorism, enforcing immigration law, protecting our cyber infrastructure, etc.)
  • Agriculture Department (supporting programs important to rural America and that advance US food and fiber industries, farmers, ranchers, etc.)
  • Department of Transportation (funding interstate highways, roads, bridges, etc.)
  • National Science Foundation (conducting and funding research to help the US maintain its technological leadership)
 
Or, instead of those, we could have instead doubled the budgets of the Veterans Administration, the Energy Department, and the Department of Justice.
 
Defense your top concern? We could have used the interest paid instead to give the Pentagon a 50% funding increase.
 
The bottom line? The $10 trillion that our government will add over the next decade to the existing $31 trillion federal debt – absent reform like the House passed this week – means interest payments will continue to soar. That in turn means funding for the things we all want from our federal government – including lowering our taxes – will become ever-more difficult. That is not just foolish, it’s what might even be called “mean."