Party time is over. Republicans have just ended their national nominating convention, while Democrats capped theirs off last week. Throughout both conventions, speakers directed their firepower at the “enemy,” the opposing political party incapable of doing anything well.
But what Republican and Democratic speakers didn’t mention is that policies agreed on by both parties have contributed to a jaw-dropping and record-setting $4 trillion deficit. Unless the two parties team up to get a grip on wasteful spending, taxpayers will have to mortgage their futures to Capitol Hill due to years of overspending. It’s time for the parties to get together to address runaway spending, rather than blaming one another for the nation’s woes.
As of late August, the deficit for the year has surpassed the $4 trillion mark and the national debt is nearing an astounding $27 trillion. In other words, that’s $200,000 for each and every household across America. Now, there are usual caveats that are worth mentioning. As the issuer of one the world’s leading reserve currencies, the U.S. can at least temporarily shoulder large increases in deficit spending. But this advantageous situation may not last for much longer.
Since the end of March, the dollar has slid considerably against other international currencies and markets are bearish against the dollar. Additionally, temporarily low interest rates are not an invitation to racking up debt on the national credit card. Even at a 2 percent interest rate, a $30 trillion debt load requires more than $600 billion in annual interest payments. That’s about the current annual cost of Medicare, and more than half the annual price tag of Social Security. Unless spending gets under control, policymakers will have to make difficult decisions between managing interest payments and funding national programs that hundreds of millions of Americans rely on.
And even those figures assume that interest rates will remain low for the foreseeable future. According to Mercatus Center fellow Veronique de Rugy, “empirical research finds that the growing public debt burden will put upward pressure on interest rates.” Policymakers ignore this vicious cycle of debt driving interest rates driving interest payments, and “do not acknowledge the fact that significantly higher debt service repayments are passed on as costs to future generations.” The problem for taxpayers is a significant and obvious one, but lawmakers fail to embrace straightforward solutions that would reduce the future debt burden.
Congress should kickstart spending reforms by focusing on the costly, unfair practice of corporate welfare. For example, the Paycheck Protection Program (PPP) was supposed to benefit struggling small businesses but wound up bolstering mammoth corporations and wealthy celebrities. Taxpayers foot the bill for Robert De Niro’s chain of luxury sushi restaurants and hotels, while also having to shell out for Kanye West’s fashion company. And, at least nine lawmakers benefited from PPP loans despite clear and obvious conflicts of interest.
Unfortunately, this forgivable loan program is just the tip of the iceberg when it comes to Robin Hood-in-reverse policies. The Department of Defense showers hundreds of billions of dollars per year on well-heeled contractors (i.e. Boeing, Lockheed Martin) to construct costly, underutilized weapons of war. The Lockheed Martin-developed F-35 will cost taxpayers more than $1.5 trillion over the life of the program, yet faces basic logistics information system issues. Even after 20 years of development, the F-35’s automatic logistics information system is failing to operate properly and spits out inaccurate information about the plane’s condition.
These boondoggles illustrate the need to more carefully examine spending programs. There’s no doubt that the Pentagon needs state-of-the-art weapons to defend America, but costly, unnecessary acquisitions bolster contractors instead of the national defense. Similarly, PPP loans have helped millions of small businesses, but giveaways to the well-to-do undermine the program’s purpose.
Lawmakers should ensure that programs across the federal government are serving their intended purposes instead of becoming magnets for rent-seeking. This will take a bipartisan effort and cannot be accomplished in the current environment of nastiness and name-calling. Until both parties get together and hold a convention on spending reform, taxpayers will fall deeper into debt and despair.