The biggest election issue for 2024 is getting even bigger. It's the federal deficit, which is expected to balloon to $2 trillion at the end of the current fiscal year (Sept. 30).
Let's be clear: the massive, bipartisan wave of deficit spending over the last few years has already pushed debt levels to eye popping highs. What is causing the surge in red ink this time?
As The Washington Post reports, it caught official observers by surprise:
“To see this in an economy with low unemployment is truly stunning. There's never been anything like it,” [former Obama administration economist Jason] Furman said. “A good and strong economy, with no new emergency spending — and yet a deficit like this. The fact that it is so big in one year makes you think it must be some weird freakish thing going on.”
What's so freakish about it? The reality is Uncle Sam is taking in less tax revenue and spending more.
A lot more:
…Social Security payments increased because they are indexed to inflation; the government spent more on education, veterans benefits and health care; and the bipartisan infrastructure law, as well as the 2022 Inflation Reduction Act, started sending billions of dollars out from the government's accounts.
It's almost as if the old phrase “there's no such thing as a free lunch” really means what it says. One cannot earn less and spend more without incurring more debt. And that's exactly what the government is doing.
And according to the Manhattan Institute's Brian Riedl, things could get much worse, with $3 trillion deficits becoming commonplace in the next decade. The result of it all? A potential debt crisis – a real one in which interest payments become the biggest line item in the federal budget.
Naturally, the political class says it has plans to curb all this debt without harming a single program their constituents care about.
Which is how we got into this mess in the first place. And it's not like anyone should be surprised by this, never mind think it's somehow “freakish.” As Riedl noted on the website formerly known as Twitter:
…the bill is coming for past decisions – massive Social Security & Medicare costs for retiring baby boomers, and continued fiscal expansions by politicians who believed that government borrowing was free because interest rates would keep falling forever. So wrong.
It is frustrating because this is the exact scenario – unreformed SocSec & Medicare benefits plus politician spending sprees become the dynamic stick that gets lit by rising interest rates – that I (and a few others) have spent the past several years screaming is coming.
Instead, we were told SocSec and Medicare cannot add to deficits, and we need an “ice cream party” of trillions in new spending that we'd be foolish to pay for because interest rates are low – as if rates would never rise again.
And yet here we are. One day, maybe, fiscal responsibility will make a return on Capitol Hill and the White House. I'm not counting on it – neither Team Red nor Team Blue seems to be serious about making any of the choices required to pay for all the government we've got.
