Nobody Cares About Federal Debt, But It Cares About Us

Nobody Cares About Federal Debt, But It Cares About Us

In response to my speculation that we’re going to end up reforming Social Security by letting it break, several people told me—disapprovingly, which is good for them—that politicians will just fill the gap the way they always have, by borrowing more money.

Well, here’s the thing about that. They can try borrowing their way out of this, but by the time Social Security breaks down for good, 19 years from now, they might find it a bit difficult.

Why? Because borrowing endless sums of money is how we’re already papering over the fiscal unsustainability of the middle-class welfare state.

It’s middle-class welfare that drives the budget. That’s my answer to people who tell me we can deal with the problem by cutting “corporate welfare” or foreign aid or NASA space missions. Look at the federal budget. Aside from national defense—the only really big federal expenditure that’s actually mandated in the Constitution—federal spending is absolutely dominated by Social Security and Medicare. Even welfare to the poor—like food stamps or Social Security Disability, which has become de facto welfare for the long-term unemployed—is secondary. Everything else is loose change.

Aside from national defense federal spending is absolutely dominated by Social Security and Medicare.

Except for one other big expenditure: interest on the national debt, which is becoming bigger and bigger. By the time the next president completes two terms—based on the choice we’re about to make—interest on the national debt will be the third-largest item in the federal budget. Shortly before Social Security uses up all of its nominal reserves in 2035, interest on the debt will be the second-largest expenditure. A few years after that, it becomes the single-largest expenditure. We will be taking the lion’s share of government revenues and using them just to keep up the minimum payments on all the money we’ve borrowed for decades in the past. So don’t think we’ll just be able to go back to that well and borrow even more to save another failing government program.

These projections depend on the assumption that we do nothing to avert the problem. And that’s exactly what we’re doing.

The debt is not on the agenda of any of the leading presidential candidates, and none of them has a real plan for how to deal with it. (Well, Bernie’s plan is to tax everything, but that’s a plan to pay for an even bigger welfare state, not to pay down the debt on the one we already have.) Ted Cruz would probably like to do something about the debt, but after last Tuesday, he’s struggling just to get a second-place plurality in his own party’s primary.

It looks like we’re not going to deal with the debt, for all the reasons we’re not going to deal with Social Security. All the impulses that compel a nation to pile up this much debt are the same forces that will drive it to ignore that debt, put blinders on, and keep piling it up until we are forced to stop.

All the impulses that compel a nation to pile up this much debt are the same forces that will drive it to ignore that debt.

We still want the middle-class welfare state to work. When it doesn’t work, a whole lot of us don’t want to deal with the hard choices or question the basic ideas behind it. We want to find scapegoats like Chinese factories or Mexican immigrants (on the Right), or Wall Street and “billionaires” and the Koch brothers (on the Left).

We already knew that was true of Democrats. What we learned in 2016 is that it is also true of a lot of Republicans who claimed they were four-square in favor of small government and free markets and the Constitution and totally against debt and taxes and crony capitalism. They are now voting for a front-runner who doesn’t care about any of those issues. You know how politicians like to tell you a nice story about the principles they stand for, but when it comes time for action, they take the easy way out, kick the can down the road, and vote for the crudest conception of their short-term interests? Well, the lesson of 2016 is that the voters do that, too.

This is our last really good opportunity to deal with some big problems, and the fact that so many people in both parties are contemptuously throwing away that opportunity shatters some big illusions.

There is still room for hope—on the other side of the crisis. There are plenty of examples (India in 1991 comes to mind) of countries that have stopped borrowing because they had no choice, that have cut government jobs and reduced regulations. It’s like the planning-to-fail plan for Social Security. It’s great if we can reform our system because we made wise decisions ahead of time. But eventually, we’ll reform it because it will all break and we’ll have no choice.

That moment of crisis is going to come someday, because we may not care about the debt, but the debt cares about us.

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