Roth: If Biden wants to solve a debt crisis, he should pay down the national debt

Faced with economic woes including the highest inflation in 40 years, questionable foreign policy decisions, and an overall feeling that we are not better off than we have been in years past, the Biden administration is looking to find some way to garner approval. The most recent desperate efforts center around student loan cancellation.

Americans are carrying about $1.75 trillion in student loan debt currently, an issue that I addressed in a recent article for TheBlaze. Instead of trying to buy votes through the picking of winners and losers via student debt cancellation, the Biden administration and Congress should be addressing the crisis that matters to all Americans: the $30.4 trillion national debt.

Progressives touted that because the government could print its own money, they could spend in a virtually unlimited fashion without consequence (an argument that makes almost as much sense as saying since you have a checkbook, you can write an unlimited number of checks in any amount). Hitting historic inflation levels has concretely disproved that notion while proving what everyone else knew: Unchecked spending drives inflation. Unfortunately, that has saddled Americans not only with higher costs for goods and services, but also a tremendous national debt burden.

To put the federal government’s out-of-control spending in perspective, the U.S. population grew about 14% from 2002 to 2019, but federal government spending increased a whopping 120% during that period,. With the massive COVID “relief” spending, 2002 to 2021 saw an increase in spending of 339%! Obviously, this massive spending was in excess of tax receipts, creating multitrillion-dollar deficits for the last couple of years.

Financing these deficits has, in turn, pushed up the overall debt burden. In fiscal year 2017, the U.S. national debt was just over $20 trillion, meaning we have seen 50% growth in debt in just the last five years!

What that means is that as of fiscal year 2021, based on CBO estimates, U.S. taxpayers spent $413 billion (after excluding government transfers) of their money on interest payments to service that debt. That’s a whole lot of money going to pay not for new things, but rather for financing things we have already bought.

This burden is expected to increase. CBO and White House estimates projected the interest burden to double that amount by 2030, but their projections were based on a 10-year Treasury yield that had a slow climb, only nearing 3% by the end of this decade. The 10-year yield at the time of writing is hovering around 3%. Now, that won’t impact the debt cost all at once; the current average maturity of U.S. Treasury debt is between five and six years. But that means we will be seeing the increased costs phased in and more of our dollars paying for interest on debt.

With so much being spent on interest payments, it crowds out other spending, forces individuals to pay more in taxes, or both. It also doesn’t leave a lot of room for funding “in case of an emergency,” without seeing the implications of printing “funny money” like we have over the past couple of years.

While the Biden administration said recently that it plans to pay down the national debt in the current quarter, given a projected FY deficit of $1.4 trillion (via the White House’s OMB Historical Tables, an amount higher than pre-COVID deficits) which will need to be financed with debt, that statement seems to be smoke and mirrors at best.

If Biden officials want to solve a true debt crisis that impacts taxpaying Americans broadly, they need to work with Congress to ensure they stop government overspending, run a surplus, and start to materially pay down the high debt load that we carry (around 130% of GDP, but just over 100% if just counting debt held by the public). While some folks will argue that financing that debt was cheap and so it makes for a good deal, I will return to basic economic principles. While true that if debt delivers an ROI on an investment it is very helpful, debt for spending is never a good deal. With total U.S. national debt being 1.3 times GDP, it’s even less of a “deal.”

Any federal tackling of debt shouldn’t be a giveaway to some people at the expense of others. The focus should be on what impacts us all, and that is out-of-control government spending.