By Brad Polumbo
During the public health crisis caused by COVID-19 and the economic crisis that resulted from the government-mandated societal shutdown, the public’s attention has focused on short-term threats and immediate consequences. This, understandably, led to an emphasis on figures such as the approximately 2.1 million confirmed cases of coronavirus, roughly 118,000 deaths from the virus, and the 44 million Americans and counting who have filed for unemployment since the crisis began.
But one key measure has gone under the radar—the untold trillions our government has piled onto the national debt during this crisis. This debt burden will haunt future generations long after the pandemic subsides and the economy reopens. Thus, our debt-financed COVID-19 response represents a fundamentally immoral intergenerational transfer of wealth. Those who directly benefit from the spending are sending the bill down the line for today’s young people and tomorrow’s taxpayers to bear the burden. Responding to a crisis today isn’t a justification for creating a crisis for the next generation to deal with—and the debt is indeed approaching crisis levels.
New calculations make the severity of the current debt spike dreadfully clear.
Manhattan Institute economist Brian Riedl ran the numbers and concluded that between the $2.4 trillion cost of already-passed COVID-19 response pills, the economic downturn’s $4 trillion impact on the federal government’s budget, and $1.3 trillion in interest on the new debt, the COVID-19 pandemic and government response will lead to an astounding $8 trillion in new federal debt.
NEW from me: The likely $8 trillion in federal debt from the pandemic is largely unavoidable. The real travesty is the $8 trillion in debt that Congress built during the previous decade-long economic expansion, and other huge debt drivers moving forward.https://t.co/jGHiADXmSc
— Brian Riedl 🧀 (@Brian_Riedl) June 11, 2020
As with the recent debt increases from the Covid-19-related laws, the national debt has been mainly driven for the past 60 years by social spending, or government programs that provide healthcare, income security, education, nutrition, housing, and cultural services. These programs have grown from 20% of all federal spending in 1959 to 62% in 2018:
Under current laws and policies, the Congressional Budget Office projects that almost all future growth in debt will be due to increased spending on social programs and interest on the national debt.
Legislators ignore this towering debt crisis at the peril of future generations.
One immediate consequence that massive deficit spending imposes on future generations is crippling interest payments that tomorrow’s taxpayers will have to cover. The interest on the national debt must be paid each year, and the annual expense associated with that payment only increases as the total debt grows.
The annual interest was already projected to hit $1 trillion by 2030 before the latest crisis hit and before counting all the new debt. This means future generations will have to shell out trillions more in taxes every year to service the debt we’re accruing now via spending that, at least ostensibly, benefits us today.
And it’s widely understood that high levels of government debt are a serious drag on future economic growth. This happens in part because massive government deficits “crowd out” private sector investment by drawing from the pool of available money. But that’s hardly the only economic consequence of government debt.
Here’s how the non-partisan Peter G. Peterson Foundation summed up the consequences of the runaway national debt:
Growing debt also has a direct effect on the economic opportunities available to every American. Based on data provided by CBO, income per person could increase by as much as $5,500, on average, by 2049 if we were to reduce our debt to its historical average.
In addition, high levels of debt would affect many other aspects of the economy in the future. For example, higher interest rates resulting from increased federal borrowing would make it harder for families to buy homes, finance car payments, or pay for college. Fewer education and training opportunities stemming from lower investment would leave workers without the skills to keep up with the demands of a more technology-based, global economy. Faltering support for research and development would make it harder for American businesses to remain on the cutting edge of innovation, and would hurt wage growth in the U.S. Furthermore, slower economic growth generally would also make our fiscal challenges even worse, as lower incomes lead to smaller tax collections and put the federal budget further out of balance.
Of course, it is future workers who will bear these economic consequences—not the Baby Boomers in Congress who are burning through taxpayer money at lightspeed.
Here’s a hypothetical that helps put the gross immorality of skyrocketing government debt simply:
Imagine a parent who responded to a financial crisis affecting their family not by racking up bills on their own credit card, but by taking out a credit card in their child’s name and loading it up with charges for them to deal with later in life. This is effectively what the federal government is doing right now in response to COVID-19. At the very least, Congress shouldn’t have let the national debt continue to mount during the prior decade of growth. Fiscal responsibility would have cushioned the blow in case Congress was later forced to spend profusely in response to a crisis like COVID-19.
But instead, policymakers chose the path that would be politically beneficial in the short-term and shrugged off the future consequences as not their problem. As famed economist Thomas Sowell said, “The national debt is the ghost of Christmas past.” For future generations, holidays may not offer much cause for celebration.
Brad Polumbo is a libertarian-conservative journalist and the Eugene S. Thorpe Writing Fellow at the Foundation for Economic Education.
This article is republished with permission from Fundation for Economic Education.