Deficits, Debt and how They Relate to Social Security – A Primer
Jeff Szymanski works in political communications at The Association of Mature American Citizens. He wrote this piece to explain the deficit, the debt, and federal spending in an easily understood way.
The federal budget deficit (amount of overspending for one fiscal year) is predicted to be $984 billion for the year ending September 30, 2019 and could easily creep over $1 trillion. Add to interest payments the spending on just the four largest programs—Defense/Veterans, Social Security, Medicare, and Medicaid, and you are at 82 percent of the entire federal budget. It is worth noting these tend to be precisely the programs politicians say must not be touched. Even Social Security, which is supposed to be self-funding through the payroll tax, ran a deficit in 2018. It will do so every year until it reaches insolvency in 2034. Past surpluses are allowing it to stay afloat without across the board benefit cuts for a little over another decade.
What if you eliminated (not cut but literally abolished and zeroed out) every item other than “The Big Four” programs in the federal budget? While no one would argue for that, you still could not reach balance. The math simply isn’t there. And the “everything else” is a lot, including air traffic controllers, national parks, research on diseases, the FBI, and the entire federal judiciary and corrections system to list but a pittance of the hundreds of programs and agencies. The Congressional Budget Office projects the U.S. will pay more in interest to service its debt than it will spend on Defense in just five more years.
Add all past federal deficits and you have the total national debt, now at nearly $22 trillion. Tax cuts, wars, and economic stimulus packages have each added trillions. Both political parties share the blame. The $22 trillion equates to $66,000 for every U.S. citizen (adults and children) and $178,000 per U.S. taxpayer.
How long can this insanity continue? Not much longer, though it is impossible to give a specific date of reckoning. Consider a 30-year mortgage where the borrower pays interest only and just keeps passing the loan down from generation to generation such that no one is paying back the principal on the loan. What bank would ever agree to never getting its money back? Or, picture lending money to an individual or a business that continues to come back for more funds year after year after year. At some point any sane person would begin to fear not getting back what was already lent (let alone the interest owed) and put a stop to lending anything further.
Creditors of the U.S. government will reach the same conclusion at some point. Fully 45 percent of debt held by the public is owned by foreign investors, of which China is the largest single holder. Major lenders could soon start demanding higher interest rates as the risk of loaning the U.S. money increases. The catastrophe for the entire U.S. economy and financial system will be when people and governments simply have no confidence in lending to the U.S. government at all.
What will we do then? “Then” is too late, hence the need for action now. AMAC has advocated for years to reduce federal spending across the board and has even taken the tough but necessary stand to preserve and modernize the Social Security program, without raising taxes, for future generations. Read the plan here.