Past President Donald Trump’s recent omnibus domestic spending plan will add more than $4 trillion to the national debt, according to a recent report released by the Congressional Budget Office (CBO). That’s a 53 percent increase over the next ten years. This screaming prediction accompanies a federal debt already sky-high, now approaching almost $37 trillion. The CBO projects that the national debt will increase by another $20 trillion through the end of 2033. This disturbing trend should be deeply troubling to anyone who cares about the fiscal wellbeing of our nation’s next generations.
The CBO’s analysis indicates that the federal debt is on an upward trajectory, even before accounting for Trump’s spending initiative. The Trump administration touted this provision as a stimulus of sorts, citing increased economic growth leading to increased tax revenue. It will most assuredly exacerbate an already tenuous fiscal situation.
The White House always assured advocates regarding the spending bill. They assert that it will reduce future deficits and national debt and increase economic growth. Officials are counting on increasing economic activity to increase tax revenues. This significant hike would go a long way to making up for at least some of the projected increases in the national debt.
Skepticism looms among economists and analysts. Shai Akabas, vice president of economic policy at the Bipartisan Policy Center, in particular, called attention to the dangerous risks associated with growing national debt. He warned, “The credit rating agencies are saying this is a concern for investors. At some point, we’ll have a crisis and people will look back and say, ‘Why didn’t we do something earlier?’”
The problem of national debt is nothing new, with the U.S. government last having a budget surplus in 2001. The consequences of this increasing debt are serious. Credit rating agency Moody’s downgraded the U.S. credit rating from Aaa to Aa1 in May, citing rising concerns over the government’s fiscal management and its potential impact on investors.
As interest rates go up—as they inevitably will in response to the rising debt burden—the economic fallout should be severe. According to the CBO report, persistent high-interest rates will reduce overall economic output and further retard real wage growth. Charley Ballard, a professor of economics at Michigan State University warned that we cannot sustain the current levels of U.S. debt. He stated, “I’ve been surprised that the world credit markets have such an enormous appetite for dollar debt,” adding, “I just can’t believe that appetite is infinite.”
Additionally, as creditors face increasing uncertainty about repayment, they will be forced to negotiate for greater yields on U.S. debt. Kent Smetters pointed out the troubling trajectory of U.S. fiscal policy: “It was already an explosive debt path — now we’re piling on top of it.”
The impacts of this historic surge in borrowing go well beyond just the size of our credit card bill. Only future Americans will bear the stiff price of today’s escalating debt. There are grave concerns over who might be held liable to pay it back. Smetters succinctly emphasized this point: “As you get more debt, ultimately somebody has to pay for it.”
The administration continues to point to strong economic growth as the answer to our growing debt levels. Advocates, stakeholders and lawmakers alike are questioning whether this approach will yield real change without harmful repercussions.
