The public debt is already past the tipping point.
While the debate continues on the infrastructure bill currently before the Senate, it looks like some version of the bill will pass. Supporters should be able to convince at least 60 of their colleagues to vote in favor. That will be all 50 Democratic Senators and at least 10 GOP Senators. Since seventeen GOP Senators voted to move the bill out of committee, at least 10 should vote for it.
Those more moderate GOP Senators who will vote for this bill will praise the bill as a truly bipartisan effort, something rarely seen in Congress. All supporters will tout the benefits of improved highways and bridges as well as the expanded internet access. And the other social programs the bill expands are good for the economy.
Former President Trump has urged Republicans to vote against the passage of this bill. His concern, and the concern of the more conservative Republicans, is the huge amount of government spending. After this passes, the Dems will try to pass a larger $3.5 trillion to $5.5 trillion spending package using reconciliation. That requires only a simple majority in the Senate.
The deficit for this year is already $3 trillion.
Admittedly, there was no concern about huge government deficit spending for the last decade. As a result, annual deficits averaged nearly a trillion dollars. Last year, the deficit was $3 trillion. But now the country is past the tipping point. Spending more money we don’t have and increasing the deficit, is not the right thing to do today.
The public debt will be $30 trillion by year end, of which about $22 trillion was raised by selling bonds to the public and the other $8 trillion was simply printed by the Federal Reserve. Is that a problem?
Most economists would say that if the total public debt is less than one year’s GDP, it is not a problem. Above that, it could be a problem. Since one year’s GDP will be about $22 trillion, the $30 trillion debt far exceeds the annual income of the country.
What are the problems?
Interest must be paid on the debt annually. This year the interest expense will be nearly $400 billion. That’s…