The debt ceiling deal ignored the real problem

Politics is largely the art of theatrics and illusions. Crises are manufactured to enable both parties to claim to be the firefighters who extinguished the fire. But the underlying problems remain unaddressed, guaranteeing a new crisis in a never-ending cycle. 

The recent debt ceiling deal, suspending the debt limit for two years, is emblematic. The crisis was created by government spending extravagance that had sent the national debt surging past $31 trillion and incurring carrying costs approaching $1 trillion even with record low interest rates. 

The Congressional Budget Office projects the national debt at a staggering $50 trillion by the end of the next decade. If interest rates on Treasury securities climb back to historical averages, that means the lion’s share of the federal budget will be devoted to paying the carrying costs of the debt, with crumbs left over for everything else, including defense, Social Security and Medicare. Our financial doomsday clock is approaching midnight. And the president and Congress, like the ostrich, stick their heads in the sand.

In but 14 years, Social Security trust funds necessary to pay benefits are projected to become exhausted. The Medicare Hospital Insurance Fund is projected to be depleted by 2031. Annual trillion-dollar budget deficits are projected as far as the eye can see. National security spending is out of control, despite the elimination of any danger of foreign aggression against the United States. We are the safest country in the history of the world by orders of magnitude, yet we are spending more than $1.6 trillion annually and climbing in preparing to fight the last war — more than 50 percent of all discretionary spending. A national defense strategy of invincible self-defense could be sustained by a fraction of the current $1.6 trillion.

The battlefield is moving to space and cyberspace. We now sport a Space Command. Cyber-attacks can easily cripple a nation’s infrastructure and military communications. Military technologies, including drone warfare, are changing at warp speed. Traditional weapons systems that gestate long years before coming to fruition are commonly obsolete before deployment. 

The F-35 Lightning II Joint Strike Fighter program is the Defense Department’s most expensive weapon system program. The Department estimates it will cost nearly $1.7 trillion to buy, operate and sustain the aircraft and systems over its lifetime. I would wager that the F-35 will never be used to defend the U.S. against foreign aggression.

Entitlement programs must also be arrested or terminated in favor of a single national safety net for the truly destitute. In fiscal year 2022, entitlement programs gobbled up 52 percent of the budget. In the prior fiscal year, the number reached an astronomical 66 percent because of one-time Covid payments. There are six major entitlement programs based on various thresholds of need: Social Security, Medicare, Temporary Assistance for Needy Families, Medicaid, unemployment, and economic support. These entitlement programs should be phased out favor of a national safety net to ensure all have access to the bare necessities, comparable to President Richard Nixon’s Family Assistance Program. 

The goals should be to encourage self-improvement and self-reliance — the touchstones of self-esteem and pride. As the proverb goes, “If you give a man a fish, you feed him for a day. If you teach a man to fish, you feed him for a lifetime.” 

Now is no time for complacency. The nation’s fiscal crisis waxes daily. The population ages, thrusting a prohibitive financial burden on the new generation. In 1960, there were 5.1 workers per Social Security beneficiary; that ratio has dropped to 2.8 today.

The Federal Reserve is insolvent. Its balance sheet of U.S. Treasury bonds and mortgage-backed securities jumped from $4 trillion when the Covid-19 pandemic began to $9 trillion at the start of 2022 as interest rates approached zero. With interest rates now climbing back to historical averages to fight inflation, these Treasury bonds and securities are worth but a fraction of their face value or cost. If the assets were carried at market value, the Fed would be insolvent. Many private banks have similarly vastly overvalued loans or securities because of the spike in interest rates. The bailouts of Silicon Valley Bank and First Republic Bank are but the tip of the iceberg. 

Herbert Stein was chairman of the Council of Economic Advisors under Presidents Nixon and Gerald R. Ford. He advised that, “If something cannot go on forever, it will stop.” We are about to witness the truth of that wisdom as the nation inches daily towards insolvency. Congress and the White House fiddle as the country capsizes.

Armstrong Williams (@ARightSide) is the owner and manager of Howard Stirk Holdings I & II Broadcast Television Stations and the 2016 Multicultural Media Broadcast Owner of the Year. He is the author of “Reawakening Virtues.”