Only three months ago, the US debt crossed the $32 trillion mark. Here we are again, this week passing $33 trillion, with still no end in sight. As usual, Democrats are blaming Republicans, Republicans are blaming Democrats, as the political circus in Washington perpetuates a never-ending debt ceiling crisis.
The New York Times attempts to shed light on some of the reasons behind this relentless debt growth.
The Inflation Reduction Act of 2022 was previously estimated to cost about $400 billion over a decade, but according to estimates …. it could cost more than $1 trillion thanks to strong demand for the law’s generous clean energy tax credits.
Connecting clean energy tax credits with inflation reduction remains a rather vague proposition; and trillion-dollar spending programs are notorious for blowing through budgets.
It’s bad enough the State forces taxation upon the People; but, the inability to spend within an annual multi-trillion-dollar budget only adds insult to injury.
The New York Times highlights another troubling issue:
In late 2022, the I.R.S. delayed by one year a new tax policy that would require users of digital wallets and e-commerce platforms to start reporting small transactions to the agency. The policy was projected to raise about $8 billion in additional tax revenue over a decade.
Now, picture being $33 trillion in debt while looking for new and innovative ways to tax private citizens on their crypto wallets to “raise” $8 billion over a 10-year period. It’s evident taxation alone will never sufficiently address the fiscal challenges in Washington.
Also explained:
A Treasury Department report last week showed that the deficit — the gap between what the United States spends and what it collects through taxes and other revenue — was $1.5 trillion for the first 11 months of the fiscal year, a 61 percent increase from the same period a year ago.
The feasibility of extracting an extra $1.5 trillion in annual tax revenue must be questioned. Barring significantly increasing the wealth confiscation of the masses, making up for this annual shortfall by simply taxing more will never suffice. Even if higher taxes were the solution, we shouldn’t be surprised if deficits persist.
Amidst this alarming $33 trillion milestone, Treasury Secretary Janet Yellen appears unfazed by the debt level, appearing on CNBC, addressing the nation with a straight face saying:
The statistic or metric that I look at most often to judge our fiscal course is net interest as a share of GDP.
By the same logic, should the government borrow and spend $10 trillion at 1% on make-work projects, this would be okay as the trillion-dollar interest expense pales in comparison to the boost in GDP. If so, it rings true that debt doesn’t matter, so long as taking on new debt services the old debt.
The causal nature of the Federal Reserve is seldom made. But we must keep in mind that the Fed’s ability to buy government debt makes the US Government’s ability to spend money it doesn’t have that much easier. It’s true the Fed does not own all the US debt. But if it weren’t for the Fed, we wouldn’t be $33 trillion in debt as it is.
