- - Monday, January 25, 2016

Compound interest, so the saying goes, is the most powerful force in the universe. It can turn a meager investment into a rich treasure with the passage of time. It can also transform manageable debt into a crushing financial burden that can never be repaid. Sadly, that could be the fate of the United States due to persistent overspending, according to the Congressional Budget Office’s (CBO) Summary of the Budget and Economic Outlook.

From 2016 to 2026, public debt as a percentage of gross domestic product (GDP) is projected to rise steeply, like the snow-capped Rockies towering over the Great Plains. If the nation remains on its current fiscal trajectory, the CBO concludes in an understated warning, “Such high and rising debt would have serious negative consequences for the budget and the nation.”

The figures are dizzying. The federal deficit of $439 billion in 2015 — the lowest of the Obama presidency — is slated to grow to $554 billion this year, then explode to $1.37 trillion by 2026. Cumulative debt is on track to escalate from the current $10.7 trillion to $23.8 trillion. At 86 percent of GDP, that level of arrears rivals the worst ever, during World War II. Interest alone on the debt will spike from $225 billion this year to $830 billion in 10 years.

Congress’ nonpartisan budgeteers point a finger at the omnibus spending bill and tax break extensions that President Obama demanded and Congress agreed to in the waning days of 2015 for the worsening economic outlook. Much more damaging, the CBO says, is the mounting effect of entitlements such as Social Security and Medicare, which alone are on course to cost an additional $2.5 trillion by 2026. Mediocre annual growth rates of 2.7 and 2.5 percent for the next two years are forecast, and a desultory average of a 2.1 percent over a decade. Government revenues won’t lag, though. They’re expected to grow 4 percent this year to $3.4 trillion. When tax receipts rise faster than the overall economy, it’s a sign that the financial burden on Americans is growing.

Predicting human events can be more difficult than the weather. With the ink barely dry on the CBO report, a foul mood has taken hold in the new year, casting doubt on its modest economic expectations. Wall Street’s January performance has been the worst ever recorded, staggered by the headwinds from China’s slowest growth in a quarter-century and OPEC’s war on American oil-producing rivals.

Overspending isn’t just an American habit — it’s gone global. Debt for Organization for Economic Cooperation and Development nations, essentially the developed world, averaged 111 percent of GDP in 2015, and 185 percent of GDP for emerging nations. Growth begins to suffer when debt levels reach 90 percent of GDP, according to the National Bureau of Economic Research. On the road of overspending, the sign up ahead reads, “Welcome to oblivion.”

Productivity is the goal of industry, but the product of government is debt. It’s a symptom of too many government wizards trying to purchase their dream world with other people’s money. The social welfare states they construct, which incentivize indolence rather than productivity, are reaching the point of unsustainability.

With Democratic presidential candidates Hillary Clinton and Bernie Sanders promising to forge ahead with trillions in new spending, Americans need Republicans to dominate both ends of Pennsylvania Avenue in order to turn things around before it’s too late.

Sign up for Daily Opinion Newsletter

Manage Newsletters

Copyright © 2020 The Washington Times, LLC. Click here for reprint permission.

Please read our comment policy before commenting.


Click to Read More and View Comments

Click to Hide