Commentary

Fed Debt Is Unsustainable: Nat’l Debt Per Household Set to Total Nearly $200,000 in 2026

By Rachel Greszler | February 23, 2016 | 9:53am EST
The west front of the U.S. Capitol is seen under repair Sept. 2, 2015 in Washington. Congress returns on Sept. 8 with a critical need for a characteristic that has been rare through a contentious spring and summer -- cooperation between Republicans and President Barack Obama. Lawmakers face a weighty list of unfinished business and looming deadlines, with a stopgap spending bill to keep the government open on Oct. 1 paramount. (AP Photo/Alex Brandon)

Spending in Washington is out of control. Accountability has disappeared. Federal programs run on autopilot. Policymakers identify endless new spending “needs” without ever evaluating the effectiveness of existing programs.

As individuals and families work to put food on their table, pay a mortgage or rent, and save for their children’s college or their own retirement, should they really have to give up a portion of their paychecks so that the government can promote its own image?

Did you know that the federal government spent $569 million in 2014 to promote its own image? According to The Heritage Foundation’s Blueprint for Balance, “funds include spending on programs such as a $1 Presidential Gold Coin stakeholders outreach initiative, Forest Service messaging to parents of Spanish-speaking Tweens encouraging them to ‘discover the forest,’ and cooking videos to promote U.S. agriculture products overseas.”

Terrifying Projections

The Congressional Budget Office (CBO)’s recent projections of our government’s budget outlook are positively terrifying. Federal spending in America is unsustainable, and failure to address reckless spending and unmanageable debt will destroy our economy.

If nothing is done, just one decade from now, in 2026, Americans will face:

  • $23.8 trillion debt held by the public (this debt excludes what the government borrows from itself). That’s $191,000 per American household, or 3.5 times the median household income
  • $830 billion in annual interest payments. That’s more than $46,000 that each American household must pay in 2026 alone to cover previous generations’ excess spending. This is 15 percent more than the entire defense budget. But while defense spending provides freedom and security, Americans get nothing from interest payments.
  • $23 trillion in Social Security and Medicare spending. In other words, every worker must fork over $17,800 of their earnings to support retirees. That’s more than 40 percent of a median full-time worker’s salary in 2015.
  • A $1.4 trillion deficit. Eliminating this 2026 deficit without spending cuts would require a whopping 51-percent increase in income taxes, bringing the 15-percent rate to 23 percent and the top rate of 42.8 percent (including the Obamacare surtax and personal exemption and itemized deduction phaseouts) to 65 percent.

Blueprint for Balance

Such enormous burdens on future generations will cripple the economy and impoverish millions of Americans. In order to solve this, the Heritage Foundation has an alternative path to rein in government spending and debt while improving our ability to help the poor and provide a secure national defense. The Blueprint for Balance shows how America can follow a path to prosperity, rather than to the poorhouse.

By eliminating wasteful and inefficient spending and focusing taxpayer dollars on core government functions, Americans can experience a very different future. Under The Heritage Foundation’s Blueprint for Balance:

  • Federal debt held by the public in 2026 would be $9.3 trillion lower, a reduction of almost $75,000 per household.
  • Interest payments would decline by $320 billion in 2026 alone. Instead of paying nearly $6,700 in interest in 2026, each household would pay only about $4,100.
  • Working Americans would still pay a significant chunk of their paychecks to support retirees, but their total bill would decline by 23 percent—from about $17,800 per worker to $13,700.
  • The federal government will achieve a balanced budget within seven years, in 2023 (not including positive economic growth effects that would lead to balance sooner).
  • Americans will save $1.3 trillion in Obamacare taxes, and federal surpluses will eventually lead to even lower taxes.

This alternative scenario is achieved through more effective spending across all areas of government. The Blueprint for Balance details 115 specific proposals to reduce non-defense discretionary spending by $97 billion in FY 2017 and lays out a path for returning entitlement programs to their original purposes, all the while maintaining a strong national defense.

Rachel Greszler is a senior policy analyst in economics and entitlements at The Heritage Foundation's Center for Data Analysis.

Editor's Note: This piece was originally published by The Daily Signal.

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