Debt and Taxes - The American Spectator | USA News and Politics
Debt and Taxes
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The impeachment trial of an ex-president with a foreordained result mercifully comes at a time when America faces no pressing problems.

One such non-problem, as evidenced by politicians pushing for $2,000 checks for illegal immigrants, free money to pay for the funerals of the coronavirus dead, and to erase money owed on student loans, remains deficits and debt.

It has been a non-problem for a long time. This makes it a massive problem.

Both the Obama and the Trump administrations ran deficits exceeding $1 trillion. The Biden administration prepares to run deficits in excess of $1 trillion for its duration. And if Trump had won a second term, deficits would have likely reached colossal heights, too.

Neither the first nor the second 2020 presidential debate heard the utterance of “debt,” at least as it relates to the federal government’s obligations. The word “deficit” came up in reference to trade. But the only time a candidate or moderator uttered the word occurred during the second debate when Joe Biden remarked, “The Founders were smart; they allowed the federal government to deficit spend.”

The Congressional Budget Office (CBO) this week projected a deficit of $2.3 trillion for this year. The figure does not take into consideration the president’s new round of stimulus, so the true number likely climbs somewhere around the $3 trillion mark. Far greater than half of funds used to operate the federal government come from borrowing. The profligacy makes 2020 and 2021 the years witnessing the largest deficits as a percentage of the gross domestic product (GDP) since the Second World War.

The basic reason for this involves revenues slightly lower than recent historic averages and expenditures dramatically higher than recent historic averages. The CBO estimates revenue totaling 16 percent of GDP and outlays at 26.3 percent of GDP this year. C+ math students grasp that this equation does not add up. The A+ math students in high office fail to understand this.

“Federal debt held by the public — which stood at 100 percent of GDP at the end of fiscal year 2020 — is projected to reach 102 percent of GDP at the end of 2021, dip slightly for a few years, and then rise further,” the CBO forecasts. “By 2031, debt would equal 107 percent of GDP, the highest in the nation’s history.”

Our debt-to-GDP ratio exceeds that of Zimbabwe. Is any country really too big to fail?

The CBO anticipates a gradual rise in inflation. This ties in with the massive deficits, which, because of both their sheer size and the suppression the laws of supply and demand to keep interest rates low, receive their funding almost entirely through the Federal Reserve and not through investors or other countries scared off by a ridiculous return on investment and not possessing the motherlode to purchase the securities required to fund the federal budget. In other words, the central bank of the United States prints money to bail out the Treasury of the United States.

The Federal Reserve’s balance sheet exceeds $7.4 trillion. That amounts to about 35 percent of GDP. A year ago, the total number stood well below $5 trillion, a figure propped up after years of quantitative easing. Its assets grow in direct correlation with the amount of money it lends the U.S. Treasury, which can no longer coax investors to fund its gargantuan deficit.

The debt weighs down the economy, becomes more burdensome with the predicted growth of interest rates, and dilutes your dollar. But rather than settling our accounts, politicians settle grudges through an impeachment trial.

Daniel J. Flynn
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Daniel J. Flynn, a senior editor of The American Spectator, is the author of Cult City: Harvey Milk, Jim Jones, and 10 Days That Shook San Francisco (ISI Books, 2018), The War on Football (Regnery, 2013), Blue Collar Intellectuals (ISI Books, 2011), A Conservative History of the American Left (Crown Forum, 2008), Intellectual Morons (Crown Forum, 2004), and Why the Left Hates America (Prima Forum, 2002). His articles have appeared in the Los Angeles Times, Chicago Tribune, Boston Globe, New York Post, City Journal, National Review, and his own website,   
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