A View From the Valley
By Georgia Earley
Each year, and sometimes every few months, our elected leaders re-visit the same question. Should they pay our government’s bills, money that’s already spent? And each time, our leaders hit a budget impasse which shines a light on a subject that’s otherwise quietly shoved under the rug, our national debt.
So what happens? Republican majority legislatures try to cut programs; Democrats try to raise taxes. And both raise the debt ceiling with hopes their programs will eventually “balance the budget” which hasn’t happened since 2001.
Almost every sitting president and their administration has raised the federal debt ceiling since its inception in 1917. So since our leaders have not been held accountable for spending within that budget, some ask why have a debt ceiling at all? Others say that, if nothing else, discussing a debt ceiling at least once a year illuminates our leaders’ failure to address our national debt.
Prior to the 1980s, increases and suspensions of the debt ceiling were used as an occasional stop gap to stimulate the economy during down turns or sluggish growth. After the 1980s, not so much, including the two raises and two suspensions during the first Trump administration when the economy was, in fact, growing very well.
Today our national debt is $36.19 trillion. To put it in perspective, in 2024 all income made by all U.S. citizens no matter where they live (Gross National Product) will be about $27.53 trillion. That’s a debt to income ratio of 75%. A reasonable ratio for any business is 36% or less; above 43% is considered too high.
So essentially our economy is a house of cards. If and when our leaders can no longer hold it up with their short term fixes, and we declare bankruptcy as other countries have, we can kiss our 401K’s and cheap gas prices goodbye.
Republican leaders have always been credited with being fiscally responsible. So it disappointed many that, on December 20, while saying they care about the deficit and promising to cut $2 billion in government waste, they agreed to a back door handshake with president-elect Trump to yet again raise the debt ceiling at least $1.5 trillion early 2025 without any budget whatsoever. And this is despite the fact that we are now in a period of economic growth.
The irony is that many of these same leaders, who had also agreed to each debt ceiling raise or suspension of Trump’s last presidency during robust economic growth, apposed raising the debt ceiling in 2021 to prevent a recession when the economy was in free fall. So all leaders are guilty of increasing and exceeding the budget whenever it suits them, despite their rhetoric. Perhaps if both parties had been willing to work together on the 2021 COVID American Rescue Plan Act bill and to compromise, we might have spent less money and reduced subsequent inflation.
*So the bottom line? We need to watch what our leaders actually do and not be fooled by what they say. And we need to encourage bi-partisan compromise.
And what about eliminating the debt ceiling altogether, as President-elect Trump would also like? Will that unleash all restraints on spending and eliminate even the semblance of accountability to voters as to how our money is spent?
In fiscal year 2024, we citizens paid $892 billion in interest on our national debt. According to the Congressional Budget Office, in 2025 to cover the interest alone will take 13% of total federal spending.
How many businesses would survive a debt to income ratio of 75% while paying 13% interest? And every time our leaders gamble with our tax dollars in their political game of “government shut down,” our global credit score goes down which means our interest rates go up.
This is our hard earned money, tax dollars paid in good faith by we, the people, for our collective good. So instead of allowing our candidates and elected leaders on both sides to distract us with cultural special interest issues, perhaps we should pay more attention to how our leaders are managing our money, especially in times of economic growth when we might actually have a chance to pay down our national debt. Paying interest is a losing game. And as long as our leaders think our national debt is not a priority to us, it will not be to them.