Yes, yes. I know I am apparently almost the last of a dying breed, a fiscal conservative who actually believes that someday the government ought to, indeed is morally obligated to, pay back the enormous debt it has accumulated. But I do understand that the world I grew up in, in which people and governments were expected to live within their means, is passé, and that we now live in a never-never land in which politicians in both parties compete to offer us voters ever more debt-financed goodies from the government and it is gauche to worry about the debt.
Still, despite the press drumbeat for a crisis to justify yet another massive $1.9 trillion stimulus package (with borrowed money), on top of the $3.1 trillion the government borrowed in 2020, there is another side to the argument that ought to be heard.
I suggest reading an article in Issues & Insights today which can be seen online here. Yes, it is a bit right-wing in tone, as you can see from the title, but they make a reasonable case, worth considering, that $1.9 trillion is too much, and although some help is certainly needed, it ought to be more targeted toward the places that really need it.
The official federal debt currently stands at about $20.5 trillion, which is about the size of the entire U.S. GDP for 2020 (about $20.8 trillion), and that doesn’t even count the truly massive ($100-175 trillion) unfunded promises in things like Medicare and Social Security.
In 2020 the average interest on the federal debt was very low, about 2%, and the government paid $376 billion in interest payments. To put that in perspective, that $376 billion is more than half of what we spend on the military ($636.4 billion in 2020), or about three quarters of what we spend on the rest of the government agencies, not counting the military ($470.3 billion).
If inflation returns just to its historic level of about 4%, then interest alone on the federal debt will increase to about $760 billion, or more than 70% of what it costs to run the whole government. And that is just returning to the historical average. If we actually got real inflation of 5-6% or more, interest payment on the debt would absolutely swamp the federal budget. And remember, during the Carter administration in the 1980s fed rates reached 20%, so even higher rates are not unprecedented.
All of which is to say it is not unreasonable to be uncomfortable with the size of these big debt-financed stimulus packages, especially since no one in either party has proposed any way of ever paying back the debt.
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