By Jeff Szymanski, AMAC
Yoga classes for bureaucrats. Brown snake eradication program. Congressional pensions. Pacific Coastal Salmon Recovery Fund. Those are actual lines in recent federal budgets totaling $150,000, $668,000, $38 million, and $65 million respectively.
All are “chump change” compared to $363 billion (with a “b”) to be spent this year on interest on the debt. That’s $53 billion higher than last year, a 17% increase. Interest payments are now 8% of the budget and increasing, crowding out vital programs and priorities.
What do Americans get for $363 billion? Absolutely nothing. Interest is the price paid for decades of spending beyond revenues, as finance charges on credit cards pay for privileges to spend beyond one’s income.
The federal budget deficit will hit $984 billion for the year ending September 30 and could top $1 trillion. Add interest to spending on the four largest programs— Social Security, Defense/Veterans, Medicare, and Medicaid, and you reach 82 percent of the entire budget. These are precisely the programs politicians say must not be touched. Even Social Security, self-funded through payroll taxes, ran a deficit in 2018. That will continue until it reaches insolvency in 2034. Past surpluses are allowing it to continue without benefit cuts now.
What if you eliminated every item other than “The Big Four”? While no one would advocate that, you still could not reach balance. And “everything else” is a lot—air traffic controllers, parks, disease research, FBI, and federal courts and prisons, to list a pittance of programs and agencies. The Congressional Budget Office projects the U.S. will pay more in interest to service debt than it will spend on Defense in five years.
All past deficits equal today’s $22 trillion national debt, $66,000 for every citizen and $178,000 per taxpayer. Tax cuts, wars, and economic stimulus have each added trillions. Both parties deserve blame.
The insanity cannot continue much longer. Consider a mortgage where a borrower pays interest only and keeps passing the loan down generation to generation such that no one pays back principal. What bank would ever agree to never getting its money? Or, picture lending money to an individual or business that comes back for more funds each year. At some point, any sane person would fear not getting back what was lent (let alone interest owed) and put a stop to further lending.
Creditors of the U.S. government will reach the same conclusion. Fully 45 percent of debt held by the public is owned by foreign investors. China is the largest single holder. Creditors will demand higher interest rates as the risk increases to loan the U.S. money. The catastrophe to our entire financial system will be when investors simply have no confidence in lending to the U.S. government at all.
What then? “Then” is too late. AMAC advocates for reducing federal spending now and has even taken the tough but necessary stand to preserve and modernize Social Security. AMAC now calls for the creation of a fund to eliminate the debt and strengthen our nation.
First, Congress and the President must do their part and balance the budget. That stops adding to the $22 trillion. Second, citizens can do their part. The debt cannot be eliminated in years or even decades. But we can start with “America’s Security Fund”.
AMAC urges America’s Fortune 500 companies help save the country. A “we didn’t cause this problem” is no excuse. As an integral part of the economy, companies must be involved. If each contributed $1 million, $500 million would be collected. A $2 million contribution yields $1 billion. Individuals could contribute on tax forms with an added line.
Contributions to “America’s Security Fund” would not be tax deductible and could be spent for debt reduction only after the federal budget is balanced. The fund would be overseen by a Board, chaired by the Treasury Secretary and prominent Americans from the public and private sectors, academia, unions, large corporations, and business.
Publicity is vital. Research shows people donate to causes if they know others are doing so. AMAC will inform its membership. We look to government, civic and religious groups, and businesses to aid in this enterprise. America’s future depends on it.