Put aside the partisanship. Put aside any “because I like/dislike the current President” reasoning. Dismiss party loyalty. We need serious, thoughtful discussion. How much is too much money for the federal government to spend?
No administration/Congress has reined in federal spending since Pres. Bill Clinton and House Speaker Newt Gingrich made intentional efforts together in the late 1990’s. Each executive/legislative branch since has simply spent more. Note the most recent patterns:
- In the fiscal year 2019, the government spent $4.4 trillion. They brought in only $3.5 trillion.
- The government spent $6.6 trillion In the year of Covid — aka 2020. They brought in only $3.4 trillion.
- Pres. Trump proposed $4.8 trillion in spending last year.
- Last week, Pres. Biden proposed $6 trillion for the year ahead.
Each year, when the federal government spends more than it brings in, we have to borrow money to cover that annual deficit; each deficit adds to our debt. Our current national debt exceeds $28 trillion.
A key metric for analyzing the health of this practice is the public debt-to-GDP ratio. As explained concisely by The Balance (for those of us who are not professional economists):
What Is the Debt-to-GDP Ratio?
The debt-to-GDP ratio is a simple way of comparing a nation’s economic output (as measured by gross domestic output) to its debt levels. In other words, this ratio tells analysts how much money the country earns every year, and how that compares to the money that country owes. The debt is expressed as a percentage of GDP.
How Does the Debt-to-GDP Ratio Work?
The debt-to-GDP ratio indicates how strong a country’s economy is and how likely it is that it will pay off its debt. Specifically, it’s used to compare debt between countries, and to determine whether the country is headed for economic turmoil.
The debt-to-GDP ratio is a useful tool for investors, leaders, and economists. It allows them to gauge a country’s ability to pay off its debt. A high ratio means a country isn’t producing enough to pay off its debt. A low ratio means there is plenty of economic output to make the payments.
If a country were a household, GDP is like its income. Banks will give you a bigger loan if you make more money. In the same way, investors will be happy to take on a country’s debt if it has a relatively higher level of economic output. Once investors begin to worry about repayment, they will perceive a higher risk of default, which means they will demand more interest rate return for their investment. That increases the country’s cost of debt. When the cost of debt gets out of hand, it can quickly become a debt crisis.
Historically, the debt-to-GDP ratio has stayed below 40%. In the year 2000, the debt-to-GDP ratio rose to 57%. After the first quarter of 2021 alone, the U.S. debt-to-GDP ratio is 127%.
Friends, this is one of the reasons the Intramuralist struggles with partisanship and/or party adherence. Parties attempt to get us to overlook something in the name of something else. With presidents GW Bush, Obama, and Trump being the three presidents with the biggest budget deficits in our nation’s history — and current trajectories suggesting Biden will easily make them a clear top four — it certainly seems we’ve become too accustomed to addressing our nation’s problems by simply spending more. With all due respect, that doesn’t make sense. Just as I did during the three previous administrations, I struggle with the lack of paying down the debt. I struggle with the always-increased spending justifications. I struggle with the clear kicking of the economic can far further down the road. By both parties.
In response to Pres. Biden’s justification for unprecedented more, note the gentle commentary from CBS News last week: “The White House argument that now is the time to spend big is predicated on low interest rates and the urgent need for better roads, bridges and jobs. What Biden administration officials don’t say outright is that Democrats currently control the White House, Senate and the House, a potentially once-in-a-generation opportunity for Democrats to implement their agenda.”
The concern, therefore, is that party agenda and political opportunity continue to take priority over what’s best for our country. While Covid understandably, dramatically affected federal spending, a 127% debt-to-GDP ratio is not best; it’s not healthy. It leads to a devalued dollar and potentially, massive levels of inflation, essentially increasingly taxing us all.
What will it take to stop this pattern? … this pattern by both parties? Will we as a public quit accepting this practice?
Many suggest “politics are downstream from culture,” meaning our politicians will govern in response to how they perceive culture to flow or to what we as a culture will accept. Let me respectfully suggest it’s time to have serious discussion about no longer accepting this.