America has a debt problem. The U.S.’s debt is currently at $35 trillion and is increasing with no end in sight.
Over the past ten years, “Interest expenses … have remained fairly stable due to low interest rates,” according to the Treasury Department. However, the rate hikes from the past few years meant that the government was paying a lot more interest on the debt it holds.
The future does not look much brighter. The Congressional Budget Office (C.B.O.), a non-partisan organization that provides financial data to support Congress, said the U.S. debt is on pace to hit $54 trillion dollars by 2034. According to the New York Times, “From 2024 to 2034, the United States will spend more than $12 trillion alone on interest costs.” If that seems like a lot, it is. Peter Grandich, a noted financial planner, told Drew Mariani that on a per year basis, servicing interest will account for half of the money the government takes in.
Fixing the Books
Finding ways to pay for this interest won’t be easy. “Governments only have two ways of raising money: they can raise taxes or cut spending,” Grandich said “and we’re going to see both of that on a large scale, not only nationally, but state and local cities, because we can’t be sustainable at these rates.” Those taxes, Grandich suspects, will substantially fall on America’s working class.
William A. Galston, opinion columnist at the Wall Street Journal argued “politicians should at a minimum stabilize the national debt as a share of GDP so that the burden of interest payments and debt refinancing grows no faster than the economy.”
One proposal to avert a debt crisis comes from Brian Riedl of the Manhattan Institute. Riedl proposes a combination of entitlement reform – like raising the age of Social Security eligibility to 69 by 2037, and tax increases – like raising the top income tax bracket. According to Riedl, his comprehensive plan, “would… save taxpayers $47 trillion over three decades in reduced interest costs on the federal debt.”
Catholic Social Teaching
The Catechism Catholic Church does not have a section on government debt, however, there are reasons, informed by Catholic Social Teaching, to be concerned about governments increasing their debt. “There is no doubt that the growth of government debt has been an important factor in the undermining of the key functions of government outlined in Catholic social teaching,” according to an article published in Catholic Social Thought. Philip Booth, the Director of Policy and Research at the Catholic Bishops’ Conference of England and Wales co-authored the piece.
Booth and his co-authors argue that excessive amounts of debt forces governments to make hard choices at the expense of the common good. “In several cases, the accumulation of debt has led to or exacerbated a total breakdown in the functioning of government and society. In the most extreme cases, the problem of too much debt resulted in the sovereign ceasing to exist.”
Excessive debt also makes it difficult for government officials to act virtuously. The debt, accumulated without the virtue of temperance, then creates structures of sin, according to Booth. For example, government debt may rob some citizens from what is justly owed to them, and “decisions may have to be taken to increase the tax burden beyond reasonable levels, to inflate away debt or to impose arbitrary costs on some groups who may be vulnerable. Alternatively, government may choose to default on debt or reduce vital social support programs,” Booth argues.
The Need for God
Despite warnings of coming doom, “we have to remember realistically that we have a Savior,” Grandich said. “We need to turn back to our faith and really pray and ask for God’s Divine Intervention.”
To listen to the whole conversation with Peter Grandich, click here.
