Obama’s parting gift to this country is a transformed society with $20 trillion in debt. The big question is what will Republicans do differently to curb the growth of the debt?
Given recent news about GOP plans on health care and infrastructure, there are no signs things will improve. Meanwhile, the Government Accountability Office has released a new “fiscal health” study, which portends disturbing trends for our fiscal stability.
The gross federal debt now stands at $19.94 trillion — roughly $9.3 trillion more than it was when Obama took office. It took from our nation’s founding until 2008 (including most of the profligate Bush presidency) to accrue the first $9.3 trillion in debt. The public’s share of the debt is now $14.4 trillion, an $8.1 trillion increase since 2009.
Yes, Obama more than doubled the public share of the debt during his presidency!
The gross federal debt, which includes intra-governmental debt comprised primarily of obligations for Social Security, federal pensions, and military pensions, is now 107 percent of the size of our economy and will forever grow larger than our GDP. When Obama was inaugurated, the gross debt was just 74 percent of GDP. If we look at just the public share of the debt, the numbers are even starker. In January 2009, the public share of the debt was just 44 percent of GDP; now it stands at 77.4 percent.
To make matters worse, the GAO published a report amplifying what we all already know: The current fiscal crisis will place “the federal government on an unsustainable long-term fiscal path.” Here are some other key takeaways from the report:
- The federal government made $144 billion in improper payments during 2016. Errors in Medicare, Medicaid, and the Earned Income Tax Credit collectively accounted for 78 percent of the overpayments.
- If health care spending is not reined in, the public share of the debt (now at 77 percent) will reach 106 percent in 15 years and surpass the all-time high during the peak of WWII.
- One of the reasons the debt has not already engulfed this country in a fiscal calamity is because of the artificially low interest rates servicing increased debt on the cheap. But a return to historically average interest rates, in conjunction with the growing size of the debt itself, will self-perpetuate interest on the debt as the fastest growing expenditure. It will more than quadruple from just 1.4 percent of the economy today to 6.2 percent in 30 years. The longer we wait, therefore, to address the debt crisis, the steeper the punishment will be when the tab comes due. At present, we pay $273 billion in interest payments. That number will rise to $1.4 trillion in 2045 (adjusted for inflation).
- Spending on federal health care programs will double from roughly $1 trillion to $2 trillion (adjusted for inflation) by 2045.
These are not merely abstract numbers on a balance sheet that only affect the budget of the federal government. Aside from the fact that taxpayers will ultimately bear the cost of this debt, the crushing debt and misallocation of resources is already hurting the family budget. As the report observes, “high levels of national debt may contribute to higher interest rates leading to lower investment and a smaller capital stock to assist economic growth.”
As we head into an era of GOP dominance, we must pose the $20 trillion question: Where is the party of fiscal conservatism?
Rather than discussing ways to make existing health care entitlements more free market-oriented to lower costs, Republicans are concocting a new massive health care entitlement built on top of crushing regulations that will force taxpayers to subsidize health care at the highest price possible.
This GAO report demonstrates the additional folly of pursuing Obamacare 2.0 instead of the free market. The gross cost of Medicare already outpaces military spending, and the combined federal and state price tag for Medicaid will soon overtake the defense budget. According to the CMS Actuary, in just six years, annual Medicaid expenditures will total $835 billion compared with the $687 billion projected cost of base military spending in 2023. The simple reality is that there is no way to forestall the financial collapse without dealing with health care spending.
Why can’t Republicans just speak the truth of how socialist health care is bankrupting the private and public sectors and pin the blame where it rightfully belongs? Why are they being defensive about the need to legitimize Obamacare with a commensurate “replacement?”
While the media focus on the inaugural attire of the Trump family this weekend, conservatives should begin demanding answers from Trump and Republicans to the $20 trillion question.