Pandemic Adds $8 Trillion to US National Debt
The pandemic added $8 trillion to the massive US national debt crisis, according to the Detroit News.
- The four stimulus bills passed by congress will cost taxpayers $2.4 trillion over the next decade.
- The Congressional Budget Office (CBO) predicts that the pandemic will lead to losses of $16 trillion over the next decade, reducing tax revenues and raising unemployment costs by around $4 trillion.
- The interest on the new debt will cost $1.3 trillion over the next decade.
These costs exceed the proposed "free" public college tuition or student loan forgiveness plans proposed by lawmakers in recent years. However, taxpayers will instead spend the next decade paying interest to bondholders. Most of these bonds have been purchase by the Federal Reserve, but now the Fed is slowing down its debt purchases the interest will be owed to banks, mutual funds, pension funds, investors, and foreign governments.
This additional $8 trillion was needed during a catastrophic pandemic. However, economists are now questioning the previous $8 trillion that the US government borrowed during the longest bull market in American history. The past decade was a mixture of tax cuts, increased budgets, and borrowing $8 trillion. The annual budget deficit has been increasing to become close to $1 trillion but in 2020 it could exceed $4 trillion, more than the last 6 years combined.
In 10 years, the annual budget deficit is expected to be around $2.6 trillion. This means that the national debt will be greater than $41 trillion within a decade. The national debt was $17 trillion before the pandemic. The $24 trillion in additional debt accumulated over the next decade is $168,000 in new borrowing for every household in America. The national debt rise will continue to rise due to shortages in funding for Social Security and Medicare. These numbers are best-case scenario.
Furthermore, lawmakers are betting on interest rates staying historically low. The Federal Reserve recently stated it has no plans to raise interest rates before 2022 given current market conditions. A small fluctuation in interest rates could drastically drive up the national debt. Each one percent increase would cost the federal budget an additional $3 trillion in costs over the next decade. Taxes and budget cuts would follow to pay down these debts.
Lawmakers need to control spending to ensure that the whole country is in, doesn't get any deeper. This point provides an emphasis on the irresponsible proposed agents by Democratic presidential candidates. Bernie Sanders proposed an additional $97.5 trillion in spending over the next decade. Even Joe Biden's proposal to match trillions of dollars in new spending with equal taxes.
The US government needs to spend now, but the debt that has accumulated over the past decade with an outstanding economic environment is unjustified. Lawmakers need to be cognizant of spending habits during good times so that spending during bad times doesn't overwhelm taxpayers.