Wry & Dry

The US debt balloons. And no-one is talking about it.

W&D remembers not a few years ago that everyone was worried about the US government debt.  

Readers will also remember the famous Fiscal Cliff of 2013.   This was all about automatic spending cuts to the US government budget that arose from the austerity fiscal policy of the Budget Control Act of 2011 [1].

The Fiscal Cliff turned out to be fear mongering by some parts of the media and White House.  But it got everybody's attention.

But now, well, no-one seems to care about the size of the US government's debt.  Perhaps because interest rates are so low the current cost of servicing is lower than might otherwise have been.  Or maybe people are more interested in what the government can do for them.

The facts are that US government debt has gone from $1 trillion in 1980 to almost $20 trillion today.  That is annualised growth of 13.7% p.a for 36 years!

US debt

There is a school of thought that says, well, it doesn't matter.  It's government debt and the government doesn't have to pay it off.  

Err, wrong.  

But let's assume that it's correct.  Now, who pays interest on the debt, some $225 billion p.a. and rising as the debt grows?  

Future generations.  

But wait, it gets worse.  Both presidential candidates have pledged to sharply increase federal government expenditure.  And reduce taxes.

Oh, dear. 

[1] The reductions in spending authority were approximately $85 billion during fiscal year 2013, with similar cuts for years 2014 until 2021.  However, the Congressional Budget Office estimated that the total federal outlays would continue to increase even with the sequester by an average of $238 billion per year during the following decade, although at a somewhat lesser rate.

The cuts were split evenly (by dollar amounts, not by percentages) between the defense and non-defense categories.  Some major programs like Social Security, Medicaid, federal pensions and veteran's benefits are exempt. The sequester lowers spending by a total of approximately $1.1 trillion versus pre-sequester levels over the approximately 8-year period from 2013 to 2021.