Another fiscal year races to its conclusion. Another year in which Congress failed to pass appropriations bills. Another year in which Congress ran up a huge deficit. Another year in which Congress fueled the approaching red ink tsunami.
The total national debt hit $40 trillion, with $32 trillion held by the public. Federal outlays this fiscal year, which concludes on September 30, are expected to run $7.3 trillion, with a deficit of $1.9 trillion. Interest paid on the debt will total almost $1.3 trillion, running ahead of both the Pentagon and Medicare.
The Social Security Administration recently predicted that the retirement trust fund — a convenient accounting fiction — would run out of money in 2032. The following year, Medicare’s Hospital Insurance trust fund will run dry, while overall Medicare outlays are expected to exceed those of Social Security by 2036. The Iran war already has cost more than $100 billion. Earlier this year, the House approved $1.15 trillion for the Pentagon in 2027, but the president wants $1.5 trillion. With Uncle Sam adding $2 trillion in borrowing every year and interest rates accelerating, federal interest payments will rise even faster, likely exceeding $2 trillion annually by 2036, overtaking Medicare.
Congress has demonstrated its inability to budget responsibly. It last approved all appropriations before the next fiscal year in 1996. Since then Congress has relied on massive continuing resolutions, amid budget battles that inevitably degenerate into partisan rancor and government shutdowns.
Worse are the resulting compromises, consistently increasing outlays often twinned with reductions in revenues, leading to even larger deficits. Hence the inexorable rise in the ratio of publicly held debt to GDP — 101 percent this year, expected to hit 108 percent by 2030, breaking the previous record set in 1946, after the greatest war in human history.
Interest rates also have been rising. Ruchir Sharma, Chair of Rockefeller International, observed:
A critical warning comes from interest payments on public debt, which in the last five years have more than doubled. That is a new US record, and the sharpest increase to the highest level for any major developed economy.
Alas, this is likely only the start. The Congressional Budget Office recently predicted that the debt/GDP ratio will hit 175 percent by 2056. The Brookings Institution’s Jessica Riedl warned that legislators and presidents are unlikely to hold the line either on outlays or taxes, making a 243 percent figure far more likely. As the debt continues to spiral upward, so too will interest rates. She explained:
In our current-policy projection, an interest rate topping out at 5.2 percent rather than 4.2 percent pushes the 30-year debt estimate from 243 percent to 303 percent of GDP. Adding another percentage point pushes it to 379 percent of GDP by 2056. The resulting interest costs would be staggering.
A fiscal and financial crisis is likely to arrive long before then, though, probably wrecking US finances and threatening a global economic cataclysm. While Washington has been constantly on call to bail out other governments, who could save the American system? Even Treasury Secretary Scott Bessent admitted that “the world is awash in debt.”
What to do? There is no painless answer to a problem that worsens daily, indeed, hourly. Americans could pay higher taxes. But everyone would have to do so. Taxing the “rich” wouldn’t be enough. The middle class is where the money is. Most Republicans refuse to contemplate upping old rates or adding new levies. Even Democrats are wary of squeezing average folks.
Which leaves massive spending cuts. Trimming, say, outlays for the national parks and economic grants wouldn’t be nearly enough. Roughly 85 percent of the budget goes to entitlements, health programs, interest, and military outlays. Retirees believe they have paid for their benefits (even as they receive back an average of twice what they paid in). Medical care for the poor and elderly is expensive. The only way to reduce interest outlays would be to repudiate the national debt. The famed military-industrial complex underwrites a politically powerful bipartisan coalition of ideologues committed to American primacy and domination, irrespective of cost.
Realistically, the only way to establish even a modicum of fiscal discipline is to address both revenue and outlays. Where to start? Although members of the vaunted “Blob” (as the policy establishment is known) urge policymakers to target entitlements, at least these outlays benefit Americans, including those who pay the most in taxes. As a result, these payments are politically popular. Anyone who barnstorms retirement communities across America urging that Social Security and Medicare be slashed to preserve US subsidies for Europe’s defense, allowing its residents to enjoy their more generous welfare systems, is unlikely to receive a warm reception.
Better to start with military welfare abroad. Of course, the “common defense” is specified in the Constitution and reflects Washington’s most basic responsibility. However, defense means defense, not trying to turn the rest of the world into America. In fact, the Pentagon’s globe-spanning military presence has little relation to US interests, let alone defense of America’s people, territory, prosperity, principles, and constitutional order. As George Washington famously warned, “nothing is more essential than that permanent, inveterate antipathies against particular nations, and passionate attachments for others, should be excluded.”
Even if the Middle East once warranted a substantial US military presence, it is not a vital interest today. Nor is Europe. To paraphrase Poland’s premier, it makes no sense for 540 million Europeans to expect 340 million Americans to protect them from 140 million Russians. More than eight decades after the conclusion of World War II, European governments should forge a common defense and take over responsibility for their own security. But that won’t happen until Washington ends military welfare for Europe.
China poses more of an economic than a military challenge. Beijing is neither interested in nor capable of a continental invasion of the US homeland. China is interested in dominating its near neighbors, most notably Taiwan, which lies barely 100 miles from the mainland, as close as Cuba is to America. In response, Washington should aid its Asian friends, starting with Japan, in developing their own “anti-access/area denial” strategies.
What is most threatened is American economic strength. That would be best achieved by downsizing a bloated military currently deployed around the globe, and by forging cooperative investment and trade policies with friendly nations throughout Asia, Europe, and elsewhere.
There is no painless panacea to halt America’s slide toward fiscal oblivion. Tough decisions will be required all around. The starting target for retrenchment should be America’s expansive, even imperial foreign policy. Washington is foolishly play-acting as a globe-spanning empire. This is pushing the US toward insolvency, and more. Two centuries ago Secretary of State John Quincy Adams warned:
…[B]y once enlisting under other banners than her own, were they even the banners of foreign Independence, she would involve herself beyond the power of extrication, in all the wars of interest and intrigue, of individual avarice, envy, and ambition, which assume the colors and usurp the standard of freedom. The fundamental maxims of her policy would insensibly change from liberty to force. … She would be no longer the ruler of her own spirit.”
America should return to its roots as the peaceful republic that it was always intended to be.
