The amount of U.S. National Debt has been a favorite pet peeve of mine for the many years I have written these articles. Sometimes, I almost feel like a voice in the wilderness raising the issue as our debt continues to spiral upward seemingly without concern. This has been a bipartisan problem as both sides of the aisle seem to want to outdo each other. This is a salient issue right now, as we have a new administration that seems bent on spending inordinate amounts of money in the form of stimulus for the economy from the impact of the pandemic as well in addition to a trillion dollar “green” public works/infrastructure deal later this year.
Perhaps a bit of background is in order to put in perspective how egregious the last 20 years have been for our debt problem. When the second Bush administration took office in 2001, our total national debt amounted to $5.7 trillion. At the end of that administration, our debt had increased to $10.6 trillion, an increase of $4.9 caused mainly by the Iraq and Afghanistan wars. The Obama administration had a financial crisis to deal with in addition to two wars. Fiscal stimulus, bailouts and an expansion of entitlements ballooned the debt to $19.9 trillion at the end of that administration. The Trump Administration added approximately $7 trillion to the debt with a record $3.1 trillion coming in fiscal 2020 caused in large part by the $3.7 trillion in stimulus passed by Congress to offset the effects of the pandemic ($1 trillion of which remains unspent).
Today, our total debt stands north of $27 trillion. We have added $21 trillion of the debt in the past two decades and as seen, it was bipartisan, both sides are equally culpable. Our public debt exceeds the value of our GDP for the first time since WWII and that level of debt occurred during peacetime. The Congressional Budget Office (CBO), a non-partisan entity, is projecting another $2.3 trillion deficit for 2021. It should be noted that projection does not include the current $1.9 stimulus bill, the infrastructure bill or the approximate $435 billion in student debt forgiveness that someone needs to account for.
There is no question that our economy needed some sort of stimulus to offset the negative impact of the pandemic. We have never seen the country essentially shut down by the government to stem the effect of the pandemic. Lots of people lost jobs, companies went out of business and many of those impacts linger. Some continued relief is in order.
On the other hand, the economy has rebounded more rapidly than most anyone expected. The unemployment rate has declined to 6.3% in January, we had robust growth in GDP in the fourth quarter and other indicators show improvement. Further, we have the vaccines that are being rolled out, the Pfizer and Moderna vaccines have been out since late last year and the Johnson and Johnson vaccine was just approved this past weekend. Things are looking positive and while we are not back yet, things are trending in the right direction. So, do we need all of the stimulus that is being discussed? Particularly when 60-90% of the current stimulus bill has nothing to do with Covid relief, depending on whose numbers you believe.
The United States has now joined choice company in Greece, Italy and Japan as one of the most indebted countries in the world. Our debt is at a level where debt service, that is interest and principal paid annually, are going to squeeze out other priorities. With most of our national budget going to Social Security, Medicare and Medicaid, the discretionary parts of the budget are going to get squeezed or cut out. That is on the expense side.
On the revenue side, we know the current administration is going to pass a large tax increase later this year. We are told that the tax increase will only affect those making more than $400K but I honestly don’t see any way that the tax increase doesn’t affect all of us. The problem is too acute. Lastly, we ought to be ashamed of our generation and the one following us that have allowed this situation to happen and saddle our kids and grandkids with this problem. It is not one that is easily resolved, and yet no one seems to care, least of all the politicians who have abdicated their responsibility for fiscal responsibility.
Jeff MacLellan – Columbia Daily Tribune, March 7, 2021
Jeff MacLellan is retired from Landmark Bank. He spent 37 years in banking, and has been tracking local economic indicators since he came to Columbia in 1987.
https://www.columbiatribune.com/story/business/columns/2021/03/07/maclellan-how-much-debt-too-much-debt/6919839002/