During a rare television interview this week with CNN, President Joe Biden had difficulty pinpointing just how much the misleadingly named Inflation Reduction Act would contribute to fighting climate change.
He said it would spur something around “a billion a trillion $750 million dollars billion dollars off the sidelines in investment.”
A bit of a head scratcher.
Yet that confusion is reminiscent of what I feel when I (a humble English major) try to wrap my head around a number as large as $31 trillion.
That’s what our gross national debt topped last week, a record high for the country, and one we should all be concerned about.
Economy keeps tanking
With inflation still at 40-year-highs, rising interest rates and continued out-of-control federal spending, Americans are just starting to feel the pain of our government’s years of irresponsible decisions.
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High inflation is sticking around. In September, consumer prices rose 8.2% from the year before – a slight decrease from August but higher than predicted. The scarier figure is the annual increase in core prices (which excludes more volatile food and energy costs). They hit a 40-year high of 6.6%.
To combat this trend, the Federal Reserve has aggressively raised interest rates – and is expected to raise them even higher in the coming months.
That doesn’t affect only our pocketbooks. Higher rates also make our national debt much harder to keep in check.
Since January, the debt has risen by $1 trillion. In the past five years, it has grown nearly $7 trillion. Since Biden took office, he has approved nearly $5 trillion in new deficits. Those numbers are hard to comprehend.
To break it down, every person living in the United States now has a burden of more than $93,000 from the federal debt alone.
Each American isn’t likely to get a bill in the mail for that amount. We will pay, however, in the form of even higher interest rates and cuts to federal programs.
The Committee for a Responsible Federal Budget has sounded the alarm on our country’s spending addiction, especially as fundamental programs like Medicare and Social Security race toward insolvency. As the group has observed, “The $31 trillion in debt is a staggering number that should keep them (policymakers) up at night.”
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Think interest rates are high now? Just wait
Even though we’ve passed the height of the pandemic, the spigot of spending that Congress turned on to combat COVID-19 isn’t slowing down. From infrastructure to climate change, the money keeps flowing. And Biden’s latest executive action to “forgive” student loans will add at least $400 billion in new debt.
Mark Warshawsky, an economist and senior fellow at the American Enterprise Institute, put it this way: “The most immediate and most obvious implication of that level of debt is that the government has to pay interest on that debt and that's part of the federal budget, and given it's hard to raise taxes and it's hard to cut programs, if you're spending money on interest, you're beginning to crowd out a lot of other possibilities.”
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Throw in the spiking interest rates, and things will get worse in a hurry. When interest rates are low, even high amounts of debt seem more manageable. If that’s no longer the case, the interest alone will further pinch the federal budget. It’s similar to how the 20-year-high on mortgage rates is making buying a home more costly and out of reach.
“As that amount of debt keeps on going up and up, the amount of interest that the government has to pay also goes up and up, and what's even more worrisome is that interest rates, as everyone knows, have gone up the last year quite a bit,” Warshawsky told me.
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'A vicious downward cycle'
Another direct impact of the growing debt relates to interest rates – there’s a clear relationship between the two.
“As the deficit and as debt increases, it increases rates,” Warshawshy said. “So you're getting into a situation of a vicious downward cycle, because the interest rates will keep on going up, even aside from what the Fed does or doesn't do because the increase in debt will increase interest rates.”
This is our country’s reality, and the president and the Democratic-controlled Congress don’t seem too concerned. Most Americans, however, are worried about inflation and the economy, and they should keep all this in mind when they vote in a few weeks.
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This article originally appeared on USA TODAY: As national debt hits record high, Americans will shoulder burden