If you thought $31 Trillion was an unfathomable amount of money for our national debt, there’s a new number in town.
According to the NY Post…
“Under Biden’s budget plan for fiscal 2024, the gross national debt would surge to nearly $51 trillion as of the year 2033”
I’ll give you a second to pick your jaw up off the floor.
In a scathing attack on President Biden’s refusal to negotiate cost-cutting measures. House Speaker Kevin McCarthy warned…
“Without exaggeration, American debt is a ticking time bomb that will detonate unless we take serious, responsible action.”
He issued this dire warning in a sensational speech at the New York Stock Exchange on Monday, claiming that Biden has done absolutely nothing to address the issue.
McCarthy had met with the president in February, who had initially agreed to negotiate budget cuts in good faith. However, the House speaker claims he hasn’t heard back from the White House since, leaving America teetering on the brink of the first default in its history.
“The longer President Biden waits to be sensible and find an agreement, the more likely it becomes that this administration will plunge our nation into an economic crisis,” McCarthy said.
“We must find common ground and reduce spending immediately. That’s why I’m announcing that the GOP-led House will vote on raising the debt limit in the coming weeks to avoid a disaster. However, the legislation will also include provisions to limit spending increases to no more than 1% per year over the next decade.”
The White House has dismissed McCarthy’s plan, calling it nothing more than an overture. They are instead putting pressure on the Republican leader to approve a debt ceiling increase with no strings attached.
McCarthy On Potential Default
House Speaker Kevin McCarthy stated that Republicans would not allow the government to default on its debts, and affirmed his party’s plan to seize on a rapidly approaching deadline to raise the debt ceiling to push for spending cuts and other policy concessions from President Biden.
“Debt limit negotiations are an opportunity to examine our nation’s finances.”
Mccarthy went on to say that…
“Defaulting on our debt is not an option, but neither is a future of higher taxes, higher interest rates, more dependency on China and an economy that doesn’t work for working Americans.”
Some say this could sink the stock market, thrust millions of Americans from their jobs and jolt the global financial system.
The Treasury Department has stated that it is taking extraordinary measures to continue paying its bills. However, the money spigot is set to run dry this summer, and could create an economic catastrophe.
Ballooning Interest payments On The Debt
Due to a series of Federal Reserve rate hikes in the past year, the federal government is now paying a significantly larger amount of money to cover interest payments on its debt.
In the last quarter of 2022, the Treasury Department paid a staggering $213 billion in interest payments on the national debt.
That’s an increase of $63 billion from the same period the previous year. This fourth-quarter total was also almost $30 billion more than the prior quarter, making it the largest quarterly increase on record.
Even if the Federal Reserve slows or ceases its rate hikes this year, which many economists predict, the nation’s borrowing costs will continue to rise. This is because, as existing debt matures, the government must issue new debt with higher prevailing interest rates.
According to estimates by the nonpartisan organization, the Peter G. Peterson Foundation…
Higher rates could increase the net interest cost on the national debt to approximately $9 trillion over the next decade.
This is an increase from the record $8.1 trillion projected by the CBO in May 2022 and the $5.4 trillion projected in July 2021.
Social security and Medicare
On top of the staggering costs to finance our debt, new forecasts released by the trustees of the Social Security and Medicare programs state that the Social Security program is projected to run short of cash to pay its promised benefits in around a decade, while the key trust fund for Medicare will be depleted by 2031.
These projections serve as an annual reminder that these popular programs are on unstable financial grounds. While it is certain that any attempt to fix them will face strong political opposition, inaction is likely to have worse consequences.
If changes are not implemented to strengthen the program before then, 66 million Social Security recipients would face a reduction in their benefits by 23-25%.
In the meantime, the Medicare trust fund, which provides extra funds to hospitals and nursing homes, is also running out of money. This could lead to an 11% reduction in payments to healthcare providers by 2031 if changes are not made. This deadline is three years later than the previous forecast.
Conclusion
While the idea of defaulting on the debt could indeed send shockwaves through the financial system, the true question is: How much debt can we actually handle?
We’ve been running up debt at an alarming rate over the last two decades and many Americans are worried about the long-term consequences. What does this mean for our economy, or our children and grandchildren?
Are we setting ourselves up for a “time bomb” that blows up the American economy?
If so, we should be applauding the House Speaker McCarthy and the Republicans for their fight for fiscal responsibility. Even if it’s just when the Democrats are in power.