When it comes to restoring fiscal balance, the next Speaker of the House will have his or her work cut out for them, as the White House Office of Management and Budget (OMB) projects the national debt will balloon to $50 trillion from its current $33.5 trillion by 2033 amid the current retirement wave, as Social Security goes from $1.3 trillion to $2.4 trillion and Medicare spirals from $821 billion to $1.8 trillion annually — and beyond.
Since the debt grows by about 8 percent a year on average once recessions and wars are factored in (both appear imminent), $100 trillion won’t be much further away, by 2037 or so, assuming we don’t default. In this generation’s lifetimes, for sure, if not the Baby Boomers’ who left the gargantuan debt behind.
The problem is we spend far more than we take in, with the budget baseline showing the deficit exploding from $1.7 trillion in 2023 to $2.5 trillion by 2033. Net interest (besides that which we owe to ourselves although that’s a cost too) will grow from $665 billion to $1.4 trillion, and that’s assuming OMB’s interest rate assumptions are correct. OMB earlier this year said 10-year interest rates would be 3.9 percent in 2023, but with sticky inflation at 3.7 percent annualized, they’re already to 4.6 percent.
All that will happen relatively soon. That is, unless serious changes to law are made and/or fundamental shifts from the current trajectory of demographic decline occur as fertility continues to plummet — down to 1.66 babies per woman in 2021and has been negative since 2009 — arguably the principal cause for the deficit spending as worker to retiree ratios continue dropping.
Under these circumstances, with an aging workforce, the economy can’t grow fast enough to produce the revenue needed to balance the budget. If the population starts to decline outright, a situation akin to Japan could ensue where there simply is no nominal economic growth. The Federal Reserve might contemplate negative interest rates to cope with any potential deflation. That is when legislatures normally resort to reckless deficit spending to simulate inflation and to appreciate asset prices, whether they be equities, real estate or commodities.
To avoid that fate, if it can even be avoided, Congress has but a few options, including and especially any must-pass pieces of legislation that come up every year: debt ceilings, continuing resolutions and appropriations, consolidated or otherwise. Any periodic tax or statutory reauthorizations also provide opportunities for reform.
The only recent changes in the trajectory of federal spending were the two debt ceiling deals cut by former Speakers John Boehner (R-Ohio) and Kevin McCarthy (R-Calif.) in 2011 and 2023. Those are must-pass bills that were used to extract concessions on sequestration. And those are the vehicles to attach spending reforms, sequestrations and other policy riders that achieve deficit reduction, facilitate economic growth and produce incentives to have children.
If any attention were paid at all to the nation’s demographic deficit, Republicans might find more favorable messaging on birth-related issues following the Supreme Court’s decision to overturn Roe v. Wade. If even a small baby boom could be achieved in a short period of time, likely via tax incentives, enough future taxpayers would eventually be produced to balance the budget. Our fiscal nightmare is the result of the breakdown of the institutions of marriage and the American family.
Overall, the options for deficit reduction include cutting spending, raising taxes or else producing more revenue via far more economic growth. Arguably there is no more urgent task facing the House majority — besides curtailing censorship and political weaponization of our institutions, securing the border and expanding law enforcement to curtail crime — than in addressing how we navigate America’s fiscal priorities, which are about to become more dire than ever.
The next Speaker must determine what the majority’s priorities really are and affix them to must-pass pieces of legislation, and then if they are to have any hope of becoming law, he or she must hold the current meager House majority together. But if House Republicans cannot even get to 218 on must-pass spending bills, let alone to elect a Speaker, the odds are nothing will get done.
Robert Romano is the Vice President of Public Policy at Americans for Limited Government Foundation.