Summary – The Relentless Federal Debt Growth

Summary – The Relentless Federal Debt Growth

Preface

This post is the last of seven posts on The Relentless Federal Debt Growth.  Next will be a series on the causes of Congress’s reluctance to solve our country’s big problems and what is needed.

Most retired folks with a great family and a happy life might question why I spend some money and lots of time being part of tackling such huge problems.  The answer is simple.  I believe that excessive federal debt and an ineffectual Congress have a significant likelihood of causing severe damage to our country and also to my children, grandchildren, and prospective great-grandchildren.

Now, I understand that the vast, vast majority of citizens aren’t willing to bog down their lives getting deeply involved in such wonky topics, and that is fine.  What I aim to accomplish is:  1)  to increase the number of citizens who realize these problems are present and perilous, and 2) to stimulate them to insist that their members of Congress and the President work aggressively to solve them soon in rational and comprehensive manners.  Is this too much to ask of those who continually campaign for these prestigious problem-solving positions?  No!  I don’t think so; do you?

Now to the federal debt predicament.

Problem Statement:  The federal debt has grown dramatically since the Great Recession of 2008, reached harmful levels, requires a comprehensive and sustainable array of solutions, but still is not receiving serious attention from our government.

Objective:  For the Congress and the Executive Branch to elevate the creation and implementation of responsible and permanent fiscal policies to the highest priority.

Posts on the Federal Debt Predicament:

·       The Relentless Federal Debt Growth is Perilous                                June 1

·       Federal Debt Dangers – Video – Eight Minutes                                  June 6

·       Federal Debt Risks – Comprehending the Severity                           June 12

·       Sustainable Fiscal Discipline – WHAT must be done                         June 23

·       Enduring Fiscal Discipline – WHO must produce the

Plan and make it work                                                                              July 2

·       HOW to Produce the Enduring Federal Fiscal Plan                           July 15

·       SUMMARY – The Relentless Federal Debt Growth                           July 29

The Menacing Issue – Growing Federal Debt

From:  A Comprehensive Federal Budget Plan to Avert a Debt Crisis, Manhattan Institute

The graph above is useful because it give a visualization of federal outlays.  It shows the major categories of federal spending and interest payments as a percentage of Gross National Product (GDP), which is the annual amount of all goods and services produced by our country’s economy, a measure of the size and ability of our economy to do things including funding federal government programs and paying the interest on its debt.

Considering that the rapidly growing federal debt is now at about 100% of GDP (more on this with a later graph), a level that many experts consider perilous, the strong upward slope of the graph showing federal outlays out of control should be appalling.  Remember, more federal debt each year means more interest payments – as the graph clearly shows.  Congressional Budget Office (CBO) projections are based on laws on the books at the time of the projection.  The data for this graph are from 2024 and don’t include the recent huge bill that Congress passed and the president signed that will add about $4 trillion in debt over the next ten years and of course increase interest costs.

Also obvious from the table below is that the huge portion of total outlays included in Mandatory costs and Interest, now at 74% of federal outlays and increasing to 78% in ten years, is getting worse when we need improvement.  It is obvious that we cannot solve our fiscal management issues without making significant changes in these categories where about three-fourths of the federal money goes each year – and is predicted to get worse.

The bar chart below shows how large interest costs were over a recent decade relative to federal programs that many consider important.  Interest costs are crowding out such programs.

from the Peter G. Peterson Foundation

Peter G. Peterson Foundation 

Remember that interest costs are a result of having debt.  I hope that you can stand one more example of how punishing interest costs are to our fiscal situation.  Please remember that monies spent to pay interest do not fund any programs; they do not purchase any goods or services.  They compete with programs that are important to citizens.  The U. S. government interest costs compared with the TOTAL spending of:

·       TEXAS:  Are 6.4 times as much as the 2025 predicted total Texas government spending

·       FRANCE:  Are almost 2/3 of the 2025 predicted total French government spending

Many experts on the matter of national fiscal policies feel that a country has reached debt levels that are risky and unpredictable when its Debt Held by the Public to GDP ratio has reached 100% (from about 64% in 2008.) This is an especially important measure, one that relates the federal debt to the size of the economy that must pay the supporting taxes.  The graph below shows that we are at 100% now and projected to reach the 130-170% range by the year 2035.  Oh, by the way, the Trump OBBBA bill that became law on July 1, 2025, did include extending the TCJA tax reductions, the yellow band. 

Manhattan Institute

Ray Dalio’s book How Countries Go Broke, The Big Cycle was published June 3, 2025.  The book on Amazon is #1 in Public Finance and #2 in Economic Conditions.  Mr. Dalio founded Bridgewater Associates, an extremely successful investment fund.  Over many years he has developed the Big Cycle theory and huge supporting historical databases and computer models.  In contrast to the common shorter economic cycles with which we are familiar, big cycles can happen to countries much less frequently – about once each generation.  They often have monetary and debt mismanagement as causes.

Ray Dalio’s analysis leads him to feel strongly that the U.S. is 10 years or less from the point being forced to take dramatic and painful steps to overhaul our federal debt.  However, he says we can manage our way out of such a crisis if we act soon and wisely.  If we don’t quickly move in some other manner, he believes the government should act to cut the current deficit from about 6% to about 3% of GDP.  This would have to be by changes in spending, taxes, and interest rates. 

In 2025, government revenues will be about 72% of outlays; the rest (28%) is being borrowed, causing the interest costs to rapidly increase.  Could your family do this continually without getting into big financial troubles?

What Are the Options?

Option A

·       Continue as is.  “Insanity is doing the same thing over and over again and expecting a different result.” – Albert Einstein

Option B

·       Understand that Congress must be involved, but that it has problems doing this job because of the complexity and size of the predicament and Congress’s weakness in working as a team to accomplish a goal.

·       BUT there is a way out of this dilemma:  a Congressional Commission.  For details, see the post:  HOW to Produce the Enduring Federal Fiscal Plan:   https://tommast.substack.com/p/title 

from the Peter G. Peterson Foundation

Peter G. Peterson Foundation

Our Role as Citizens

Pogo said:  “We have met the enemy and he is us.” 

We citizens and taxpayers are clearly an important part of the problem.  We want, demand, and vote for “free” money from the federal government, encouraging careerism by members of Congress and the consequent poor governance – including heavy borrowing.  We must be more circumspect about the greater pain that might ensue by not acting soon.

It is quite unrealistic to imagine that most citizens have the time, interest, and preparation to master the details of the medical care industry, defense, monetary policy, budgeting, and much more.  But citizens can at least understand the peril is great, the pain increases with delay, and they do have the power to expect effective action by Congress and the President.

There are experts that already know what must be done and how.  We must give them license to put their knowledge to work staffing a Congressional Commission.    https://tommast.substack.com/p/title .

Congress is the organization that must enact into law the experts’ plan by enacting it into law and ensuring an amendment to the constitution to guarantee the permanency of federal fiscal discipline.

A friend said to me today, “I know we have a serious fiscal problem, but Congress is not acting.”  My response was “I have no doubt that Congress will act, but perhaps not until a fiscal Dunkirk has occurred.  Our job is to is to prevent that and to minimize the severity of the corrections required – by acting sooner rather than later.”

Therefore, our role as citizens is:

·       Learn the perils of excessive debt well enough to be an advocate for fiscal sanity

·       Convince fellow citizens that taking effective action is not an option

·       Request that our members of Congress create the Congressional Commission very soon

America Deserves Better