FEB 16, 2018
In retrospect, we might be able to pinpoint exactly when the debt death spiral got away from us for good. But in the interim, it’s just one absurdist decision after another, eye-watering, paint-peeling, blisteringly irresponsible and unsustainable decisions, the one after the next.
The passage of the $400 billion C.R. [that kept the government from remaining in shutdown] has an impact that few people understand. When a C.R. is passed it keeps Government spending at the same previous baseline PLUS an 8% increase. The recent C.R. just added $200 billion per year to that baseline.
This means over the next decade, the C.R. will add $2 Trillion in spending to the Federal budget. Then add to that any other spending approved such as the proposed $200 billion for an infrastructure spending bill, money for DACA/Immigration reform, or a whole host of other social welfare programs that will require additional funding.
But that is only half the problem. The recent passage of tax reform will trim roughly $2 Trillion from revenues over the next decade as well.
Debt is, by its very nature, a cancer on economic growth. As debt levels rise it consumes more capital by diverting it from productive investments into debt service.