The headlines were eye-opening, if predictable. “U.S. budget deficit hits $2.77 trillion in 2021, 2nd highest,” read the front page of The Columbian on Saturday.
That number was for the federal budget year, which ended Sept. 30. And it was the result of a year in which the COVID-19 pandemic hampered the economy and federal spending ballooned in an attempt to keep that economy afloat. The only year with a larger deficit was 2020, when the pandemic started and spending outpaced revenue by $3.13 trillion.
Obviously, it is not ideal for the federal government to spend trillions more than it brings in over 12 months. But the situation provides an opportunity to examine the federal budget and the growing national debt, which now is nearly $30 trillion.
A debt of $30 trillion is difficult to comprehend. To place it in more manageable terms: The federal government owes more than $90,000 for every person in the country. And to illuminate the immediate impact: The United States must pay about $300 billion next year in interest on the national debt — more than $900 per person.
Still, the past 20 months have demonstrated why deficit spending is a necessary option for the federal government. Money has gone to state and city governments to help them provide services despite a drop in tax collections; if businesses are closed, as many were in the opening days of the pandemic, people are not paying income tax (Washington does not have a state income tax) and retailers are not collecting sales tax — which many states and cities rely upon.
Emergency federal funding also has been earmarked for small businesses, rental assistance, expanded unemployment payments, economic stimulus payments to nearly all taxpayers, public health, schools, and various other initiatives to minimize the impact of the pandemic.
All of that has helped prevent an economic disaster, and it has been necessary; an economic depression in the United States would have triggered a global depression, adding to the pandemic’s health and social costs.
During the pandemic, it has been essential that the federal government be able to spend money it does not have. This is in contrast to the deficit spending that occurred during the Trump administration, when tax cuts increased the deficit despite a strong economy. Enacting tax cuts while simultaneously increasing spending — as Congress and Trump did in 2017 — was irresponsible.
During the Trump presidency, the national debt increased from $19.9 trillion in January 2017 to $23.3 trillion in February 2020 — before the pandemic. It is one thing for the federal government to spend money during a crisis to help people keep food on the table and a roof over their heads; it is quite another to incur a deficit during normal times.
Hopefully, the elongated crisis of the pandemic will lead to financial prudence in the long-run. Major spending initiatives — such as President Biden’s proposed infrastructure bills — should be accompanied by methods to pay for them. For four decades, voters have been duped by the canard that tax cuts pay for themselves, giving Congress the leeway to irresponsibly manage the nation’s finances.
That has led to a situation where the national debt greatly exceeds the annual Gross Domestic Product. It is an untenable position, one that should lead members of Congress to reassess this nation’s priorities and start acting like effective stewards of the nation’s welfare.
