Spending America Into Oblivion: Business as Ususal
Spending America into oblivion has become business as usual on Capitol Hill.
On Friday, Pres. Donald Trump signed a $1.3 trillion dollar spending bill. The legislation funds the federal government through the remainder of the 2018 budget year, which ends Sept. 30.
The bill directs $700 billion to the military and $591 billion to various domestic agencies. According to the Washington Post, military spending will increase $66 billion over the 2017 level, and the nondefense spending comes in at $52 billion more than last year.
The current budget plan that paved the way for this omnibus spending bill will add about $1.7 trillion to the federal debt over next decade. According to analysis from the Committee for a Responsible Federal Budget, the Treasury will run a trillion-dollar deficit every year for the foreseeable future.
Meanwhile, that federal debt eclipsed $21 trillion this month. It has grown bigger than the US economy.
Last December, we reported that the US government is spending money like a drunken sailor. As we approach the end to the first quarter of 2018, it’s pretty clear the government hasn’t sobered up. So, just how rapidly is the federal debt growing?
An article at the SovereignMan put the spending into perspective. Consider this:
In the span of a SINGLE DAY, from Thursday (March 16) to Friday, the national debt grew by $73 BILLION. In a day. To put that number in context, $73 billion is larger than the size of most major companies like General Motors, Ford, and Southwest Airlines. And in the month of February alone, the national debt grew by an astounding $215 billion.”
In just six months, the US debt increased $1 trillion.
Now, you might expect this kind of spending during a war or a major financial crisis. But this is business as usual in what is supposed to be a healthy economy.
The growth of debt is outpacing GDP growth. According to the SovereignMan, real GDP growth in 2017 was 2.5% in real terms. If you factor in inflation, the economy grew 4.4%. Meanwhile, the US federal debt grew by 65%. In other words, the national debt expanded 36% faster than the US economy, even if you count inflation as part of growth.
Of course, the Republican Congress is nothing new. The federal government has been spending money like this for years. Consider economic growth versus debt growth over the last decade.
At the end of 2008, for example, the size of the US economy was $14.5 trillion. A decade later, the size of the economy is $19.7 trillion, 36% greater. Yet over the past ten years, the national debt has grown from $9.4 trillion to over $21 trillion– a growth rate of 123%.”
A lot of people pretend like all of this debt doesn’t matter. This is an absurd position.
Just consider the cost of servicing all of this debt. The Fed is trying to hike interest rates. For every uptick in the interest rate, the annual interest payment goes up. Somebody has to pay that extra cost – meaning you and me – either through higher taxes in the future, or inflation.
And as we reported last month, debt is a cancer on economic growth.
As the SovereignMan puts it, you can stick your head in the sand and pretend that either the debt doesn’t matter or at some point the government will fix it – both absurd propositions. Or “you can view the situation rationally and understand that, maybe, just maybe, at some point in the future, there might possibly be some consequence to arise from the largest debt pile that has ever been accumulated in the history of the world… and they make sensible preparations just in case.”
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