This week, our national debt is projected to pass $13 trillion (Want to know how big a trillion dollars is? Click here).
It’s a timely week for the debt to have its Bar Mitzvah, because there’s a debate raging anew about the health care law and whether it actually reduces the federal budget deficit. The public is still having difficulty squaring the circle where $2.3 trillion in new spending helps reduce our $13 trillion debt.
But it’s an important question to answer – perhaps the most important question to answer. As recently as this week, rating agencies like Moody’s have warned that the trajectory of our debt has us on course for a downgrade in our bond rating. If that happens, the interest rates we pay will rise, which means higher taxes to service the debt, along with more expensive mortgages and bigger credit card bills.
So there’s good reason to be concerned about government health care and the debt.
The Congressional Budget Office (CBO), analyzing the new health care law, projected deficit reduction in the order of $120 billion over the next decade. As CBO director Doug Elmendorf pointed out, however, these projections were only as good as Congress’ word. A mere two months later, Congress is already poised to break it.
If a planned 21 percent decrease in Medicare doctors’ reimbursements doesn’t take place, then the CBO estimates about the health care bill and deficit reduction aren’t worth the paper they’re printed on. And the American Jobs and Closing Tax Loopholes Act (HR 4213) – expected on both the House and the Senate floors this week – will delay that spending cut until 2013, at a cost to taxpayers of $64 billion.
Since this is an adjustment to policy that’s already in place (Gimmick Alert!), Congress doesn’t have to account for this spending under its Pay-As-You-Go rules.
Congress isn’t even living paycheck-to-paycheck; they’re borrowing money at a record-breaking pace. Our lenders remain willing to finance our spending today, but we are utterly dependent on their continued confidence. And the day international investors decide that the US is headed for a Greek-style financial crisis, they’ll be right.