The Congressional Budget Office’s (CBO) issued its latest long-term projections on the growth of the national debt. Astonishingly, as bad as the numbers issued by the CBO were, the debt crisis the nation faces is even worse than we are being told.
The CBO analysis does not take into account the full $14.344 trillion national debt, nor does it reflect the $430 billion in gross interest payments we are paying every year.
Instead it only considers the $9.7 trillion ‘debt held by the public’. That was cited by the CBO. What was not was the $4.6 trillion of debt owed to the Medicare and Social Security trust funds. Interest is owed to those programs similarly is not included.
These are real liabilities that the American people are expected to honor, and do honor under CBO’s analysis. But because they are not revealed until 2024 and 2036, when the trust funds are fully exhausted, even the dire scenarios that are presented to the American people are actually rosy.
Why would the CBO leave this out of their analysis? Ostensibly, economists would counter that it’s just money owed to ourselves, and not a share of debt held publicly. That, those obligations might be repudiated. So they shouldn’t be counted until they come due.
In reality, it’s just an accounting gimmick that hides that allows the government to understate the dire fiscal condition the Treasury really is in. When the Medicare and Social Security trust funds are exhausted in 2024 and 2036, respectively, the Treasury will be forced to borrow more money publicly anyway to honor the obligations to those programs.
So, it’s all going to wind up in the gross debt that’s reported at the end of day. That makes public debt and intergovernmental debt a difference without a distinction, but nonetheless a useful sleight of hand for the government to hide the true extent of the problem.
CBO reports that the debt will reach 100 percent of the Gross Domestic Product (GDP) in 2021. In reality the national debt will be larger than the entire economy in 2012 if not sooner. At $14.344 trillion, the national debt already represents 95.5 percent of the $15.010 trillion Gross Domestic Product.
Nor are the people warned that total interest payments already exceed the 18 percent of revenue red flag level Moody’s has explicitly warned against as being unaffordable. Just as the principal owed to the entitlements are not taken into account, neither are interest payments to those programs. Will Moody’s wait until 2024 and 2036 to discover that interest payments have suddenly jumped?
The truth is, we cannot afford to wait 15 to 25 years to be honest about the debt burden we have taken on. The crisis is now.
The projections are bad enough in any event. They point to the need for every member of Congress to take the ‘Cut, Cap, and Balance’ pledge, which would immediately cut spending by hundreds of billions, cap it at 18 percent of GDP, and send a Balanced Budget Amendment to the states for adoption.
What Congress may not understand, however, is that time is running out to take meaningful action to avert a true crisis.
Wilson is the President of Americans for Limited Government.