Opinion: Here's how Congress should deal with unprecedented national debt
The Economic Policy Institute’s Working Economics blog on July 16, 2020, posted an article by Josh Bivens entitled “Recovering fully from the coronavirus shock will require large increases in federal debt — and there’s nothing wrong with that.” This line of thought troubled us then, and troubles us even more now given the events of last week.
At the end of Q1 2020, the annual U.S. GDP growth forecast by most economists anticipated a decline of 6.5%, which would have made it one of the worst years in U.S. history. However, a resilient U.S. economy realized extraordinary GDP growth of 33.1% for Q3 2020, with several forecasters predicting high single- or double-digit growth for Q4.
The U.S. economy’s great strength over the last six months is something no economist predicted when the COVID-19 recession became obvious in March. Thanks to this remarkable second-half recovery, the U.S. economy most likely will contract under 3% for the year. This recovery is clearly a testimonial to tax and regulatory reform begun by the Trump administration and Congress in 2017, and the strong foundation the economy has shown since. But if spending is not brought under control, our economic future becomes increasingly tenuous.
Congress approved a spending bill providing a new round of economic stimulus to help millions of Americans struggling due to the COVID-19 pandemic. “Christmas tree legislation” refers to the ability of members of Congress to attach an unrelated provision or “ornament” to a bill. Pet pork projects added in this case included $40 million for the Kennedy Center in Washington, D.C., $1 billion to maintain Smithsonian museums, and $25 million to combat invasive Asian carp.
The full details and text of the 5,593-page bill and its $2.3 trillion price tag — among the largest ever — were released a few hours before the votes were held on Dec. 21. The process and timing greatly frustrated most members of the House and Senate, yet enough saw fit to vote for it that it reached President Donald Trump to be signed into law.
In addition to the approximately $900 billion to address the pandemic, the bill includes $1.4 trillion to keep the government running through September.
Legislating expenditures without revenues to fund the initiatives is known as “deficit spending.” We truly believe deficit spending is out of control. Consider it took the U.S. 205 years (end of fiscal year 1981) to tally a national debt of $1 trillion.
At the end of fiscal 1981, the total U.S. national debt was over 30% of U.S. GDP. For the fiscal year ending Sept. 30, 2020, U.S. GDP declined slightly YOY to $21.17 trillion, while our national debt has now climbed to more than $27.7 trillion, or an astounding 130% of U.S. GDP. This debt equates to more than $183,000 per U.S. citizen, or $220,000 per U.S. taxpayer.
In our opinion, the 117th Congress should consider the following measures immediately:
► The name of any Congress member who authors a special interest Christmas tree ornament or rider to legislation should be made public.
► Resolve to end the practice of riders or Christmas tree legislation.
► Develop a balanced budget amendment like those already in place by 49 of the 50 U.S. states (except Vermont).
► Pass a law prohibiting the U.S. national debt to GDP ratio to exceed a pre-determined percentage, as determined by a congressional task force made up of citizens and government and private sector economists. The law also could require Congress to either cut spending or raise taxes by recorded vote to prevent the actual ratio from exceeding the agreed-upon percentage. We believe the ratio needs to be well below 100% by 2030.
If the U.S. is to remain flexible and the dominant global economic power, let alone be able to handle needed infrastructure bills, a future pandemic, a foreign military crisis, etc., it cannot do so with a national debt to GDP ratio approaching that of a third-world country. As we begin the new year, we would all do well to focus on the massive debt burden and inflexibility we are creating for all Americans, especially our children and grandchildren.
Congresswoman Lisa McClain represents Michigan’s 10th Congressional District in the U.S. House of Representatives. Timothy G. Nash is the director of the McNair Center for the Advancement of Free Enterprise and Entrepreneurship at Northwood University.