Chris Reed: Pandemic hastens timetable for U.S. fiscal disaster

The pandemic has been a health and economic disaster for the United States and is on track to being an education disaster as well. But long after an effective vaccination has been discovered, the events of 2020 could figure in another disaster: a forced reduction in Medicare and Social Security benefits, as well as unprecedented tax hikes, to deal with massive national debt.

The U.S. was already on track for a fiscal reckoning before the pandemic because of decades of overspending. This irresponsibility was never more evident than last summer, when Congress passed a budget that provided for $4.4 trillion in spending while only anticipating $3.4 trillion in revenue — a $1 trillion shortfall during a period of robust economic growth. Incredibly, the White House, Democratic House Speaker Nancy Pelosi and GOP Senate Majority Leader Mitch McConnell depicted the deal as a healthy bipartisan compromise.

Economists who reject the idea that the United States is too big to fail did not agree. They noted the budget included $479 billion just for debt service — paying the interest on the debt — about 12% of total spending. Before the budget won final approval, the Treasury Department forecast that by 2024, all new federal borrowing would be needed just to cover the cost of debt service.

To put this in more relatable terms, it's as if a person had to max out his new credit cards to pay the interest on the debt of his older credit cards. It's a recipe for national disaster.

But the anticipated $1 trillion deficit for the current fiscal year now looks downright healthy compared to reality. To insulate Americans and businesses from the massive job and economic losses caused by pandemic lockdowns, and to help states deal with pandemic costs, Congress and President Donald Trump have authorized $2.4 trillion in additional spending since late March. The budget deficit for June alone was a staggering $864 billion. The national debt now tops $26.5 trillion — triple what it was 14 years ago.

Three years ago, Democrats and responsible Republicans were both aghast over the tax cuts Trump got Congress to approve because they added $230 billion a year to annual deficits; there is no proof for the Reagan-era claim that broad tax cuts are paid for with increased revenue — sorry, dogma believers. Guess what? The Manhattan Institute's Brian Riedl points out that between the interest on the $2.4 trillion in pandemic relief outlays and the lost tax revenue because of the pandemic recession, the pandemic will cost $240 billion annually over the next decade — and that's only if interest rates stay at their present historic lows.

But the bad news doesn't end there. On Wednesday, Kaiser Health News reported that because of additional costs caused by the pandemic, a Medicare trust fund that pays for hospital and other inpatient care for 61 million-plus Americans may run out of money by 2022, four years earlier than expected.

Even without the pandemic, demographic changes bode terribly for federal retirement programs. Each year, millions of baby boomers — Americans born from 1946 to 1964 — leave the work force, stop paying taxes, and start using Medicare and Social Security. The Congressional Budget Office says this will fuel a 30% increase in already-massive federal spending on health care from 2020 to 2030 and a 22% spike in already-huge Social Security costs.

The strain of paying for these programs will only grow. The ratio of U.S. workers to Americans who depend on retirement benefits is now 2.4 to 1. In coming decades, that will drop to less than 2 to 1 — because not only are baby boomers leaving the work force in droves, U.S. women are having fewer children than ever, a phenomenon that the pandemic will only compound. Nothing depresses childbirth rates more than economic insecurity.

And that's not the end to the bad news for those who fear America going broke. Not only is Joe Biden likely to win the White House, Democrats have an increasingly good chance of taking the Senate and holding the House, giving them control of the government.

While Biden has seemed like a moderate compared to most of the Democrats he defeated for the nomination, he's embraced a stunning array of costly projects and proposals. He wants to vastly expand the number of Americans eligible for subsidized federal health care. He wants to make public college free for students in families that make less than $125,000 a year. He wants to at least triple federal spending on low-income housing assistance and for K-12 schools with high numbers of impoverished students.

All these proposals no doubt sound great to the millions of Democrats who buy the theory that Bill Clinton and Barack Obama were mushy moderates who didn't act in big ways to help hurting Americans. There's a pent-up urgency among many on the left for a much more generous federal government. And Sen. Brian Schatz, D-Hawaii, has explicitly said that if Democrats take over Washington, they should be allowed to ignore the deficit as much as Republicans did when they controlled the White House and Congress in 2017-18.

But it's basic math that no one — not a household, not a business, not a nation — can perpetually spend 30% more than it takes in. Something's got to give when paying the interest on debt is as costly as Medicare, Social Security or national defense. Retirement benefits will have to be rolled back, the Pentagon will have to shrink and taxes will have be increased dramatically.

Because if something doesn't give, something collapses — the United States.

Reed is deputy editor of the editorial and opinion section. Column archive: sdut.us/chrisreed. Twitter: @chrisreed99. Email: [email protected]

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