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The U.S. deficit under the Trump Administration
 
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By Ernest Gurulé
News@lavozcolorado.com
 
11/27/2019

It’s a phrase tossed around everyday but one that escapes deeper understanding. It’s the national debt, something you don’t usually hear people discussing around the water cooler. Uber or Lyft drivers don’t often talk about it as they ferry passengers to DIA. It’s also not a conversation with a neighbor over the backyard fence. But there it is. What is it? How does it affect us?

Very simply, “It’s the total amount of borrowing that the U.S. government has done,” said University of Denver professor Dr. Mack Clouse. Simple enough. It’s the amount of money we need to spend to keep government open and running. It pays for everything from defense to Social Security. Right now, the national debt sits at $23 trillion dollars and counting. There’s an actual running count of the debt in New York that flips numbers at an astounding rate, if you’re ever so moved to see the figure in real time.

“A fun thing to do is write that number down,” said Clouse, who teaches at the DU School of Business. “All those zeroes that go the right of it (the $23). Just how big a number that is---twelve zeroes,” he said. Most of us will never even write down a number that big. “A million is six zeroes,” said Clouse. For most people, that’s big enough. A million is bite-sized, digestible. A trillion, not so much.

On a state level, there is nothing comparable to the national debt. Each state--- set forth in its constitution---has to balance the books on an annual basis. Has to pay its bills. Not so with Congress. When it doesn’t pay its bills, it simply rolls the unpaid amount on to the debt.

“When new borrowing is needed, the government borrows more,” said Clouse. But when Congress fails to act on an appropriations measure, as it failed to do in September---the end of the fiscal year---the government can shut down as it did for 35 days at the end of 2018 and into 2019. It was the government’s longest shutdown in history. All but essential services closed up shop. Paychecks were not issued. But workers still had to clock in. It was a demoralizing time.

To prevent a repeat of the last federal shutdown, Congress enacted a continuing resolution that will keep the government operational through December 20. The President signed the CR last week.

For most people the national debt is almost an abstract figure. But it impacts everyone in the same way household economics do. “The thing that makes people pay attention,” said Clouse, “is when you start to look at the interest that is being paid.”

For the most part, U.S. debt rests on the shoulders of Americans. But as the debt grows, the U.S. depends on other countries in order to raise capital. China currently holds a significant amount of treasury bonds. As interest rates at home rises, so too does the value of bonds held outside the country.

Right now, said Clouse, interest rates are among the lowest in history. He calls them “artificially low.” But there is no guarantee they will remain at current levels. That is scary. “If interest rates were to go back to normal levels that interest expense figure gets bigger in each budget and starts to squeeze out other things.”

In 2012, the national debt hovered at slightly more than $15 trillion. To pay it off then would have cost each American household slightly more than $131,000. At today’s $23 trillion dollar level, the payoff for each household has jumped to $152,000.

The government divides spending into three categories: mandatory spending, discretionary spending and interest on the debt. Mandatory and discretionary spending account for ninety percent of all federal spending. Mandatory spending covers programs that pay for Social Security and Medicare, so called entitlements. Discretionary spending includes defense, education and transportation.

While politicians often rail about the national debt, very little is actually done to address it. Would raising taxes to pay down the debt work? Perhaps. But it might be a solution with unintended consequences, said the DU professor. “Increasing taxes can have a negative impact on growth and consumer ability to buy goods,” he said. Others have suggested that lowering the debt would be as simple as reducing spending. There is risk there, as well, said Clouse. Reduction is spending comes with its own challenges. “You have to find places where you can reduce spending without incurring the wrath of areas where spending is happening. If you reduce (spending), someone is going to have less dollars.”

Imagine closing a military base that a community has come to depend on. Or relocating a federal job site to another state, which happens from time to time. No member of Congress wants their name on an action that takes money out of a community.

Either choice is loaded with peril, said Clouse. “Pick your poison,” he said. “It’s the situation we get into when you’ve run a deficit for as many years as we have.” Then there is the possibility of an unknown contingency, like another war.

“It would certainly get worse,” said Clouse. There is no shortage of potential hot spots that could suddenly ignite. He pointed to the Middle East and North Korea, a nation with a potential nuclear capability, as examples. “More things like that come up and it gets scary.”

 

 

 

 

 
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