Spendaholics Put America In Debt Ceiling Crisis

• America's debt is $31.5 trillion and growing by $102 million every hour of every day
• Interest on the nation's debt is projected to skyrocket to $1.2 trillion by 2032
• Washington has spent a record $13 trillion in the last two fiscal years
• Runaway government spending fuels inflation and cripples the economy

The kerfuffle over raising the ceiling on the country's debt is Washington theatre at its best.  Biden Administration officials are indignant over the House of Representatives plan to slow the Bataan-like march of federal government spending in exchange for increasing the debt amount.

The media, led by The New York Times, are sounding alarms about financial Armageddon. Failing to lift the debt ceiling "would prevent Congress from doing the basic tasks of keeping the government open, paying the country's bills and avoiding default on America's trillions of dollars in debt," the Times wrote.

Scare mongering is a tactic that has often been used by both parties in discussions about the debt limit.  This time is no different as Treasury Secretary Janet Yellen raised the specter of military veterans going without benefits; no payments to Social Security recipients; and, pulling the plug on Medicare.

Yellen keeps reminding the public the debt limit increase is needed to pay for money already spent by the government as if that precludes reining in spending. No Republican (or Democrat) will vote to end entitlements, despite the babbling statements from the White House press secretary.   

Congress has never failed to lift the debt ceiling.  This Congress will do the same. Although President Biden insists there will be no negotiations with the House, his former boss President Obama reached a budget deal to avoid a shutdown in 2013 after a protracted battle with the GOP-controlled House.  

While the debt issue elicits hysteria, there was no outrage from the media or the administration when the federal government broke all spending records in fiscal year 2021 by doling out $6.8 trillion. The Democrat controlled Congress followed that gusher with a near-record $6.27 trillion in fiscal year 2022.

In the madcap dash before the new House could be seated, Congress agreed to a $5.8 trillion budget.  The limitless spending helps explain why the current national debt is $31.5 trillion and growing $102 million every hour.  Yellen's solution? Just raise the debt limit to accommodate more reckless spending.

The mountain of debt has risen so fast that the Congressional Budget Office (CBO) projects government spending will result in multi-trillion dollar deficits stretching through 2032, adding $15.7 trillion to the national debt.  

Current debt is 124% of the nation's Gross Domestic Product (GDP). That puts the U.S. in company with countries such as Bahrain, Zambia and Sir Lanka.  For comparison's sake, U.S. debt averaged 65.2% of GDP from 1940 until 2022.  

The CBO has repeatedly warned since the last decade "the current trajectory of federal borrowing is unsustainable and could lead to slower economic growth in the long run as debt rises as a percentage of GDP. " Their admonition has fallen on deaf ears in Congress.  

In fiscal year 2021, just the interest on national debt reached $562 billion.  Last fiscal year, it soared to $724 billion, an increase of 30% in a single year.  The CBO estimates the interest on national debt will skyrocket to a record $1.2 trillion by 2032, representing 3.3% of GDP, the highest ever recorded.

Too often Americans fail to take notice of the debt.  It doesn't effect them directly, they falsely believe.  As debt grows, it will sap growth of the economy.  That directly impacts jobs and pay.  An economy in decline effects those who can least afford to ride out a recession. 

Overheated federal government spending also fuels inflation, which raises the prices of goods for all Americans. Inflation last year was 8.7%, making it harder for Americans to make ends meet. Deficit budgets will inevitably lead to tax hikes on average earners to pay for the excessive spending.

Every American has a vested interest in this squabble over the debt and spending. 

Irregardless of what politicians think, Americans aren't being fooled by the rhetoric,  A Scott Rasmussen National Survey found that 45% of Americans think the debt ceiling should only be raised on the condition there are spending cuts. Sixteen percent say the debt ceiling should not be raised at all. 

The prudent course is for Congress and the administration to reach a deal to increase the debt level in exchange for spending cuts.  Just bowing to the president's demand for no negotiations is an act of surrender.  Unchecked spending is the biggest threat to the economy, not the debt limit.    

Nearly Guaranteed Top 12 Predictions For 2023

No one is shedding a tear over the end of 2022.  Sharp inflation. Record food price hikes. Highest ever gasoline prices. Worrisome product shortages. Rising interest rates. Steep stock market losses. A porous border. Runaway federal government spending.  War in the Ukraine.  Good riddance to 2022. 

No even Nostradamus could have predicted the gloom of 2022.

When the calendar flipped to 2023, forecasters with short memories are peddling cheery news about everything from the stock market to inflation.  Optimists claim the new year will make Americans forget 2022.  Not so fast.  My occasionally reliable, highly unpredictable crystal ball is blinking red.

1. The country sinks into a recession, as predicted by a majority of economists and large banks.  The Gross Domestic Product (GDP) will be negative for at least two straight quarters this year.  The Biden Administration will avoid using the "r" word, referring to the crisis as a "temporary retraction." 

2. The economy will shed 1.1 million jobs as more major companies in the technology sector and big firms are forced to layoff employees in the face of less consumer spending.  First time unemployment claims increase each month.  Expect the unemployment rate to climb to 4.5% by year's end.

3.  Adding to the economic woes consumer credit card debt and personal loan delinquencies surge in the new year.  Consumers have been on a spending binge the last two years seemingly immune to inflationary prices.  A consumer retrenchment will negatively impact corporate earnings. 

4.  After the worse market since 2008, equities managers are clinging to history that shows markets tend not to experience two negative years in a row.  Equities bounce around early on before gaining momentum. Stocks finish the year strong with the S&P (+20%) outperforming the NASDQ and Dow. 

5. Home sales will reach their lowest point since the 1980's as interest rates make real estate less affordable, especially for first-time buyers. The good news is that the overheated increases in prices will abate except in a few markets where demand for high-end homes flourishes such as Texas and Florida.

6. The Federal Reserve, as promised by Jerome Powell, will continue to raises rates in the new year as inflation persistently refuses to fall lower than 5.8%. Food and energy prices leap higher than the CPI. Eventually, Fed hikes dampen growth, prompting Powell to forego a rate hike in fourth quarter.

7.  COVID infection rates soar past 70% in China after the Communist nation abandons its COVID Zero policy. New highly infectious variants develop as the virus rages, killing 1 million Chinese.  Chinese travelers spread the virus globally, leading to worldwide outbreaks.  

8. The Supreme Courts ends its temporarily halt of Title 42, which allows the expulsion of illegal immigrants under pandemic-era restrictions. The move unleashes a torrent of border crossings, prompting the forced resignation of Alejandro Mayorkas.

9. More fast food restaurants will join the robot revolution as testing by Chipotle, White Castle and others proves diners are satisfied with food prepared by robots.  The fast food industry will move quicker to adopt robots and AI as wage increases and the difficulty hiring workers persist.   

10.  The collapse of FTX Exchange, once a $32 billion enterprise, prods the Securities and Exchange Commission (SEC) to issue regulations for the cryptocurrency industry.  As more crypto exchanges and lenders file for bankruptcy, the new rules clamp down on the industry, softening currency demand.    

11.  The Chinese will not launch an invasion of Taiwan instead increasing menacing militaristic tactics to cower the island.  When the U.S. fails to intervene, China finds an excuse to encircle the island with a naval armada.  China threatens a blockade unless Taiwan makes concessions.  

12. Trying to speculate on Putin's strategy in Ukraine is a fool's pursuit.  But the most likely scenario is the European Union will push for a settlement as energy supplies dwindle, sapping economic growth. Ukraine is pressured into a diplomatic solution when EU/US commit billions to rebuild the country.   

Print this column and wave in your prognosticator's face at the end of 2023.  However, if you have your own predictions you would like to share, I would like to read them.  After all, the prediction business is full of people who get it wrong every year.  And that has never stopped anyone, including me.  

National Debt: Politicians Spending Addiction

Yawn.  That's the reaction of most Americans when anyone raises the issue of the country's rotund national debt.  The size of the debt--$23.1 trillion--should concern every American.  Instead people figure it's the federal government's problem.  Not their worry.  They are sadly mistaken or misled.

Quantifying the national debt can be reduced to a few key numbers.  America's debt equals $179,695 for every household in the country.  The federal government carries 46% more debt than the combined debt of every household in America.  The debt is 107% of the U.S. economy.

Even those sobering figures fall short of calibrating the size of the debt.  Consider that in the last 19 years the government has racked up more debt than than in the previous 100 years.  Since 2000, the U.S. has amassed $17.5 trillion in new debt as a result of spending more than its revenues.

The federal government's record spending binge threatens the financial health of the country, which ultimately impacts businesses, jobs and wages.  The budget for fiscal year 2020 is $4.7 trillion, a colossal 164% increase in spending since 2000. Politicians of both parties are complicit.

Federal government revenues are rising too, but at a slower pace.  The federal government estimates it will receive $3.64 trillion in revenue, the lion's share to be paid by individual taxpayers like you.  In 2000, $2.03 trillion flowed into the U.S. Treasury.  America doesn't have a revenue problem.

In 2020, the deficit or revenue shortfall will climb to $1.01 trillion by the time the government fiscal year ends September 30.  Since the end of the Clinton Administration, each Congress and president has overspent.  This trend is unsustainable without major changes in expenditures

It helps to understand what is driving government spending.  In the current budget, six out of every 10 dollars goes to mandatory spending, which includes programs such as Medicare, Medicaid, Social Security, food stamps, federal pensions, Obamacare and veterans programs.

Mandatory spending has automatic increases built in as more people are added to the rolls. Increases in benefits are baked into the budget too.  To put this in perspective, in 1968, three years after Medicare and Medicaid were created, mandatory spending represented just 27% of the budget.

For fiscal 2020, here is a breakdown of the budget for the top three mandatory spending programs: Social Security, $1.1 trillion; Medicare, $679 billion; and Medicaid, $418 billion.  Total mandatory expenditures are budgeted at $2.841 trillion.

This spending category is called mandatory because these programs have been mandated by law to be funded.  This rigid requirement leaves little room for so-called discretionary spending, which amounts to 13.3% of the current budget.  The national defense consumes 12.4% of spending.

The remaining 11.7% of the budget is devoted to paying interest on the debt.  Nearly $480 billion is included in the 2020 budget to service the interest.  There is no room in the budget to actually pay down the debt or principle.  Each year the interest gobbles up a greater percentage of the budget.

Congress has no incentive to reign in spending.  Representatives and senators use the budget as personal piggy banks to fund pet projects in their districts.  That doesn't mean the expenditures are all wasteful, but lawmakers view the projects as little more than a downpayment on their reelection. 

If Congress actually followed its own rules of producing a national budget, there would be more scrutiny of these expenditures.  But lawmakers have failed to pass an annual budget in seven of the last 15 fiscal years, instead using what's known as continuing resolutions to fund the government.

These temporary funding resolutions usually cover six months or less leaving little incentive for  a substantial spending debate.  These resolutions are the product of eleventh hour, horse-trading sessions designed to win both parties' votes and avoid political blame for a government shutdown.

Most senators and representatives, if they are honest, will admit there is too little time for members to even read what is included in the spending resolution.  They are essentially blindly rubber stamping a budget that has been engineered by a handful of members behind closed doors.

This cannot continue if Americans want accountability from their government.  Congress needs to return to the budget process where spending, the debt and specific programs are reviewed, debated, prioritized and voted on.  Congress has no greater duty than to establish the federal budget.

Unfortunately, there is only the dimmest hope this will ever happen.  A divided government, partisan bickering and voter apathy have all contributed to today's sausage making process that serves the interests of senators and representatives but lacks transparency for the American people.

Americans must demand change by contacting their elected representatives and senators.  Otherwise, Congressional members will continue on a track that surely will one day bankrupt the country and force extreme measures, including crippling taxes and Draconian budget cuts.

That day draws nearer each year that Congress refuses to tackle spending and the ballooning debt.