The Government Accountability Office has released a new report saying what ought to be obvious to everyone in official Washington: there is an immediate need for a plan to address the federal government's “unsustainable” debt levels.
Among the hard truths the GAO lays out in its report:
At the end of fiscal year 2023, the $26.2 trillion in debt held by the public was about 97 percent of gross domestic product (GDP). GAO projects that under current revenue and spending policies, debt held by the public will
*reach its historical high of 106 percent of GDP by 2028, and
*grow more than twice as fast as the economy over a 30-year period, reaching 200 percent of GDP by 2050.
The GAO reiterates that such a pile of IOUs is “unsustainable.” And the GAO also reminds the worthies that their fiscal incontinence is racking up trillions in deficits even in the face of a growing economy. In times past, economic growth meant lower deficits as more tax revenues flowed into the Treasury.
This time, however, we are faced with the unusual circumstances of a government that – in the public's name and with its sanction – ran up enormous deficits when interest rates were near zero. Those rates were historic oddities that now appear to have been rarities, too.
So long as the Federal Reserve was on hand to keep rates low, and to purchase debt at an aggressive clip (for several years), it all seemed not to matter.
Until it did – when inflation returned, interest rates normalized and debt service suddenly became a bigger budget item that defense spending.
But wait! There's this grotesque twist in the report:
Increases in interest spending will add to future debt because the government will need to borrow more to pay for increased interest costs. [emphasis added]
That's right – the federal government will have to issue new debt just to pay the interest on old debt.
In other words, we're in a debt spiral. It will pick up speed and momentum over time. The GAO offers ways Congress and the White House might avoid this nasty end. But all of them require serious-minded policy makers who are willing to make serious and difficult choices on both ends of Pennsylvania Avenue.
That seems hilariously ambitious given the character of our current political class.
The opinions expressed in this article are those of the author and do not necessarily reflect the positions of American Liberty News.
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