Deficit spending and a balanced budget
The Congressional Budget Office estimates that the federal government ran a deficit of $217 billion in August 2022, the eleventh month of fiscal year 2022. This deficit was the difference between $304 billion in revenues and $521 billion in spending.
The deficit drives the amount of money the government must borrow in a single year, while the national debt is the cumulative amount the government has borrowed throughout history that remains unpaid… the net amount of government deficits and surpluses. The interest paid on the debt is the cost of government borrowing.
According to the Center on Budget and Policy Priorities, “When the economy is weak, people’s incomes decline, so the government collects less in tax revenue and spends more on economic security programs such as unemployment insurance or food assistance. This is one reason that deficits typically grow (or surpluses shrink) during recessions. Conversely, when the economy is strong, deficits tend to shrink (or surpluses grow).”
From Fiscal Year (FY) 2019 to FY 2021, spending by the government increased by about 50 percent, largely due to the COVID-19 pandemic. Tax cuts, stimulus programs, expanded government spending, and decreased tax revenue caused by widespread unemployment account for a sharp increase in the national debt over that period. In the prior years, notable events triggered spikes in the debt, including the wars in Iraq and Afghanistan and the 2008 Great Recession.
However, the United States has carried debt since its birth. Debts incurred during the American Revolutionary War amounted to over $75 million by January 1, 1791. Over the next 45 years, the debt continued to grow until 1835 when it shrank due to the sale of federally-owned lands and cuts to the federal budget. The debt then grew through the course of the Civil War, and steadily into the 20th century. It was roughly $22 billion after the country financed its involvement in World War I.
The national debt as of 7 o’clock p.m. ET on October 31 was $31,249,839,679,127 and constantly moving upward.
There are many drivers of the national debt. One is demographics. Baby boomers are aging and expected to live longer on average than older generations. Through 2029, roughly 10,000 will turn 65 every day, impacting government programs like Social Security, Medicare, and Medicaid. Add to that the driver of increased health care costs. The American healthcare system is the most expensive in the world, but it is not necessarily a system that provides better overall health outcomes.
A third driver is insufficient revenue. It would be one thing if the tax code was designed to fund all the promises government makes, but it is not. There is a rapidly growing imbalance between revenues and spending, which leads to higher and higher deficits that result in more borrowing and an increase in debt.
Interest on the national debt adds up quickly, placing a heavy burden on the nation’s future. Every day, this interest is over $965 million.
The future of America includes many challenges that the government is required to meet. Whether security, infrastructure, education, or other interests, each one takes significant resources. Every dollar that goes toward interest payments means fewer resources available to build the future that Americans need and want.
Few agree on fiscal and monetary policy but everyone has an opinion. It is largely up to Congress, which holds control of the national “purse,” to address high levels of debt. Rather than raise taxes, which no one wants to do, the government can issue debt in the form of bonds to raise money. They can also buy back the bonds that they issued in a policy called Quantitative Easing, which was applied after the 2007-2008 financial crises. And they can reduce the rate of government spending.
While the Bible directs its discussions on spending toward individuals, the principles can easily apply to governments. “As for the rich in this present age, charge them not to be haughty, nor to set their hopes on the uncertainty of riches, but on God, who richly provides us with everything to enjoy. They are to do good, to be rich in good works, to be generous and ready to share, thus storing up treasure for themselves as a good foundation for the future, that they may take hold of that which is truly life” (1 Timothy 6:17-19).
How then should we pray?
- For officials in the various branches and departments of government as they determine their budgeting needs.
- For members of Congress as they consider the national debt, government spending, and the deficit.
- For Director Phillip Swagel as he oversees the Congressional Budget Office.
- For Commissioner Charles Rettig as he heads the Internal Revenue Service and for Douglas O’Donnell as he takes on the role of acting commissioner this month.
- For Treasury Secretary Janet Yellen as she leads the various financial agencies in her department.
- For wisdom for Chairman Jerome Powell as he oversees the Federal Reserve Board.
