Before the new year, the U.S. government hit a new national debt milestone: $34 trillion. For many voters, this number is just too enormous to comprehend. (How many zeros are in a trillion, anyway?)
But understanding the implications of a $34 trillion debt is key to understanding why federal lawmakers must address it.
In a new video, AFP Senior Policy Fellow Kurt Couchman offers an idea — one that recently was introduced in the U.S. House of Representatives — that would avoid the havoc high federal debt will create.
Our country’s national debt affects every American. Here’s why ⬇️ pic.twitter.com/WBb3VBzNfA
— Americans for Prosperity (@AFPhq) January 4, 2024
What is a comprehensive budget?
Federal lawmakers are in the thick of negotiating the annual appropriations bills right now for the fiscal year that began on October 1, 2023.
But those 12 appropriations bills only account for about one-quarter of all federal spending. And that legislation does not say anything about revenue — the tax money needed to pay for spending.
When American businesses and families create budgets, they include all money going in and out. This format helps avoid wasteful spending and decide what’s most important.
An annual, comprehensive federal budget bill would include all spending and revenue in one bill each year. It could help lawmakers determine which of the federal government’s 162 healthcare programs and 160 housing program might be consolidated to better both serve Americans.
Lawmakers only need to make a few small changes to the Congressional Budget Act of 1974 to implement a comprehensive budget, and Reps. Blake Moore and Marie Gluesenkamp Perez to do just that.
What is the Comprehensive Congressional Budget Act of 2024?
Their legislation, the Comprehensive Congressional Budget Act of 2024, would have all committees with authority over spending or revenue programs contribute to a complete, annual budget. Annual appropriations would be the core of the budget, which would also include direct (“mandatory”) spending and revenue programs so Congress could manage everything holistically.
A complete or comprehensive budget is a private- and public-sector best practice. Fourteen states – including Wisconsin, Florida, Rhode Island, North Carolina, Tennessee, Hawaii, Virginia, Georgia, and Maryland – do their budget in a single bill, and another sixteen states do just a handful of bills. This helps them responsibility deliver the services that their people need and want.
AFP supports the Comprehensive Congressional Budget Act of 2024 because it would help ensure the federal government is spending the right amount of money on the right responsibilities, and it would empower lawmakers to get control of the nation’s debt, which, at $34 trillion, threatens future innovation, security, and prosperity. It would also help Congress coordinate, consolidate, and update programs while giving them a regular way to move toward a modern, pro-growth tax code.
Why a $34 trillion national debt is a problem
Americans know what happens when we take on more debt than we earn or have saved in our personal lives.
It means stress, and it means impossible choices — do I fix my leaky roof, or sacrifice health care or education? A high debt-to-income ratio means dealing with higher interest rates when we want a mortgage or car loan. Over time, debt means a lower standard of living and maybe even bankruptcy.
These outcomes are possible for a national government, too.
The World Bank says when an advanced country’s debt-to-economic growth ratio exceeds 77% percent, big problems start to show up. Specifically, economic growth suffers.
That’s what the Japanese government faced when it let its debt-to-growth ratio balloon from a manageable 52.9% in 1990 to a growth-crushing 216.3% in 2020.
The United States’ inflation-adjusted annual growth rate has been decliningv in recent decades. As the debt-to-GDP growth ratio grows – it could balloon to 181% by 2053 – growth could stall.
Countries with high debt are also more likely to experience persistent inflation. Their leaders are forced to choose between funding national defense, domestic programs, and servicing interest on the debt. (The United States could spend as much as $10 trillion on its debt interest payments over the next decade.)
A high debt-to-growth ratio led Greece to default on its obligations, throwing the country into economic and political turmoil that undermined prosperity and opportunity.
The United States could soon look like Japan or Greece, except that America’s federal government is far too big for anyone to bail out.
The federal lawmakers must get control of the nation’s debt. Now. A comprehensive budget would be a powerful tool to get Congress to confront this challenge, and states with all variety of political leanings do something similar to serve the needs and preferences of their people.
Learn more about a comprehensive budget. Discover more ways to get federal spending under control.
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