By: Jim Geraghty – nationalreview.com – September 27, 2023
On the menu today: There is another Trumpless Republican presidential debate tonight, and you’re forgiven if you’re less than trembling with excitement and anticipation. The program begins at 9 p.m. Eastern, airing on Fox News Channel and Fox Business, as well as a Spanish-language feed airing on Univision.
I think the world of moderator Dana Perino, and I suspect the questions from her and Stuart Varney and Univision anchor Ilia Calderón will be good and thought-provoking. I don’t know if there will be one or more questions about the debt, deficit, spending, and entitlements; many Republicans have chosen to stop worrying or even thinking about those issues. If the national debt does come up, I fully expect someone on that stage to demagogue the issue and pledge to balance the budget by cutting foreign aid. (Opinion polls consistently report that Americans believe foreign aid is in the range of 25 percent of the federal budget; in reality, it is less than 1 percent.) What follows are key facts and figures that the country ought to hear, but is unlikely to hear tonight.
What the Candidates Won’t Say
Saul Alinsky wrote in Rules for Radicals that most people cannot grasp large numbers, and thus most of the voting public is innumerate and effectively mathematically illiterate: “The moment one gets into the area of $25 million and above, let alone a billion, the listener is completely out of touch, no longer really interested, because the figures have gone above his experience and almost are meaningless. Millions of Americans do not know how many million dollars make up a billion.”
This newsletter has great faith in you. Nonetheless, for a little perspective:
- $1 million dollars: Roughly the average annual salary of a mid-range long snapper in the NFL.
- $1 billion dollars: Roughly the estimated value of an average-quality National Hockey League franchise.
- $1 trillion dollars: Roughly the gross domestic product, or total value of all goods and services produced in a year, in the state of Florida.
Got it? For shorthand, a million’s a guy, a billion’s a sports franchise, and a trillion’s a big and populous state.
The current-level U.S. debt is $33.1 trillion. That is everything the U.S. owes, including $6.8 trillion in “intergovernmental holdings,” which is money that one part of the U.S. government owes to another part of the U.S. government.
When you pay your Social Security taxes, despite popular perceptions, that money does not go into any “trust fund.” There is no Scrooge McDuck-style Money Bin somewhere in Washington, storing all the money that current workers pay into Social Security for their retirement years. The federal government takes that money and spends it, and writes itself an I.O.U., and decides to worry about it later.
We are now much closer to “later” than we used to be. At $6.8 trillion, the government has borrowed from itself effectively seven big states’ worth of money.
To maintain its ability to borrow money, the U.S. government pays interest on the money that was borrowed in the past. Those interest payments are climbing higher and higher: “In 2022, the federal government spent $476 billion on net interest costs on the national debt. That total, which grew by 35 percent from $352 billion in 2021, was the largest amount ever spent on interest in the budget and equaled nearly 2 percent of gross domestic product.”
Again, for perspective, just to keep borrowing, the U.S. government paid the equivalent of roughly 476 mediocre sports franchises last year. (In case you’re wondering, that’s a bit more than three times the 153 NFL, NBA, MLB, NHL, and MLS sports franchises in the United States and Canada.)
The Covid pandemic created an enormous need to spend money — on Paycheck Protection Program loans for workers in shut-down businesses, on vaccine development, and on all kinds of relief programs. The national debt was $23.4 trillion in February 2020, so while not every last bit of spending that exceeded tax revenue since then was Covid-related, it is reasonable to say that the ordeal of the pandemic, or the pandemic years, added roughly $10 trillion — or, using our previous mental measuring sticks, ten Floridas — to the national debt.
People used to perceive the debt as being owed to foreigners, or China, but that’s actually only a relatively small portion of it — although that portion is steadily growing, from 23 percent in 1995 to 30 percent in 2022. The Pete Peterson Foundation summarizes:
Investors in Japan and China hold significant shares of U.S. public debt. Together, as of September 2022, they accounted for nearly $2 trillion, or about 8 percent of DHBP. While China’s holdings of U.S. debt have declined over the past decade, Japan has slightly increased their purchases of U.S. Treasury securities. Investors in many other countries — including the United Kingdom, Switzerland, and Ireland — have increased their holdings of U.S. debt as well.
You will hear the argument, mostly from Democrats, that the enormous debt is a sign that we need to raise taxes. But tax revenue is higher than ever. For the current fiscal year, the U.S. government’s total revenue is estimated to be $4.71 trillion. It was $4.05 trillion the year before that, and $3.42 trillion in the previous year, amid the lingering economic effects of the pandemic. Despite the perception that the rich somehow avoid paying taxes, IRS data indicate,
The top one percent’s income share rose from 20.1 percent in 2019 to 22.2 percent in 2020 and its share of federal income taxes paid rose from 38.8 percent to 42.3 percent. The top 50 percent of all taxpayers paid 97.7 percent of all federal individual income taxes, while the bottom 50 percent paid the remaining 2.3 percent.
Those “Rich Men North of Richmond” are in fact paying plenty in taxes, and it is not really the poor who are “taxed to no end,” as the song goes.
The Committee for a Responsible Federal Budget projects that the annual deficit for this fiscal year will be “about $2 trillion.”
There was a time, when Barack Obama ran for president in 2008, that he said that President George W. Bush was “irresponsible” and “unpatriotic” for adding $4 trillion to the national debt over an eight-year span. Then, the Obama administration added $5 trillion in a four-year span, and roughly doubled the national debt over his eight years in office. (As always, presidents do not have complete control over federal spending, but they do sign the appropriations bills, or, more often, the gargantuan omnibus appropriations packages.)
Then President Trump — aided by a Republican Congress his first two years in office — started running near-trillion-dollar deficits during a period of relative peace and prosperity, a deeply ominous sign. Once the country faced a genuine crisis, in the form of the pandemic, the deficit exploded to $3 trillion in fiscal year 2020.
Note that in 2016, then-candidate Donald Trump pledged he would eliminate thedebt — not merely the annual deficit, the gap between total spending and tax revenues, but the entire then-$19 trillion debt — over a span of eight years. Not only did he not even come close, he didn’t even try. Trump’s idea of an effective cost-cutting measure was cancelling federal government offices’ subscriptions to the Washington Post and New York Times.
The primary driver of the country’s spending deficit is entitlement programs, a fact that a lot of elected officials — and a wide swath of the American public –prefer to ignore. Social Security, Medicare, Medicaid, the Affordable Care Act, and other health-care programs consumed 46 percent of all federal spending. For perspective, all U.S. defense spending was 12 percent.
The U.S. spent roughly $877 billion on national defense in 2022. The U.S. federal budget deficit in fiscal year 2022 was $1.38 trillion. If the U.S. had a magic wand and hadn’t spent a single penny on defense that year, we still would have had a deficit of about $500 billion.
Again, for perspective, that’s about 500 mediocre sports franchises. The most valuable sports franchise is the Dallas Cowboys at about $9 billion. (The value of a franchise is often less about winning than about revenue from ticket sales, merchandising, and ownership of a state-of-the-art stadium.) If the United States had not spent a dime on defense in 2022, the federal government still would have had an annual deficit that is the equivalent of 55 Dallas Cowboy franchises.
For a long, long time, fiscal conservatives — you know, those allegedly merciless tightwads who are always portrayed as pushing granny off a cliff — have warned the rest of the country that the finances for these programs are on an unsustainable path, and the rest of the country has hated them for it.
Every year, the Centers for Medicare & Medicaid Services review the numbers, and the most recent conclusion is, “The Medicare hospital insurance trust fund is scheduled to become insolvent in 2031. This means that in 2031 Medicare will be unable to pay for all promised benefits, and Medicare patients will face an initial 11 percent cut in their hospital benefits.”
These new numbers are actually a better outlook than the previous few years. (As I noted in February, “Go figure, it turns out that a terrible global pandemic that kills 1.1 million Americans, mostly the elderly and the sick, reduces the projected long-term expenditures for health-care and old-age benefits.”)
This doesn’t mean that Medicare would stop paying for senior citizens’ health care entirely in 2031, but the payments to hospitals would drop significantly, with the hospitals turning around and expecting patients to make up the difference. Medicare’s hospital insurance currently covers 100 percent of the hospital costs, after the $1,600 deductible, for 65 million elderly Americans. For the first 60 days in a hospital stay, Medicare patients pay nothing. For the next 30 days, they pay $400 per day.
By 2030, Medicare’s hospital insurance is projected to cover 76.8 million Americans.
As the 2024 presidential campaign ramps up, candidates are facing pressure to pledge not to touch Social Security. While this pledge is framed as ‘protecting benefits,’ it is — in reality — an implicit endorsement of a 23 percent across-the-board benefit cut in 2033, when the Social Security retirement fund becomes insolvent. In that year, annual benefits would be cut by $17,400 for a typical newly retired dual-income couple.
If we do nothing, Medicare and Social Security hit a brick wall at high speed in 2031 and 2033, respectively.
If President Biden seems strangely nonchalant about these ticking fiscal time bombs . . . well, he won’t be in office in 2031 or 2033. (Remember, only one-third of voters express confidence that Biden will finish a second term if he’s reelected.) Biden can embrace the status quo, and the crises facing Medicare and Social Security will be some other future president’s problem. If Donald Trump wins a second term, he, too, would be riding off into the sunset on January 20, 2029.
Means-testing would not be a particularly popular solution, but it would ensure that the beneficiaries who experienced benefit cuts were the ones who could afford it the most. Encouraging, or perhaps even requiring, every American to have an individual retirement account that they contribute to regularly, starting early in their working years, is another potential solution.
This newsletter has argued that U.S. aid to Ukraine is not only moral and right, but that it is providing enormous value to us by gradually grinding down the Russian war machine and eliminating it as a threat to the rest of Europe, without costing a single American life. If you think additional aid to Ukraine is a bad idea on the merits, go ahead and make that argument. But don’t argue the U.S. shouldn’t send additional aid to Ukraine because it adds too much to the debt, or because “We can’t afford it.”
Remember, the annual deficit these days is measured in trillions, or the financial equivalent of large states.
The total U.S. committed aid since the beginning of the Ukraine war is $70 billion, or the equivalent of 70 mediocre sports franchises. Total U.S. committed military aid in that same period is $42 billion, which is roughly the gross domestic product of Vermont — the state with the smallest GDP in the nation — last year.
In fact, the financial value of the total U.S. military aid committed to Ukraine since the beginning of the war is 30 percent of the annual gross domestic product of my neck of the woods, Fairfax County, Fairfax City, and Falls Church, about $137 billion.
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