MY TURN: An abundance of zeros: trillions, billions and us

The late economist Herb Stein (father of Ben from "Ferris Bueller’s Day Off") had a saying “If something cannot go on forever, it won’t.” It came to mind as the national news (TV, papers and social media) were filled with discussions of deficits, debt and the current administration’s OBBB (One Big Beautiful Bill) as distinct from the Biden Administration’s BBB (Build Back Better). This was all prior to the Jeffrey Epstein drama. It is overwhelming to contemplate trillions (000,000,000,000) of dollars with an Idaho median household income of about $74,900 in 2023. The federal government has been running deficits (spending more than tax revenues) for all but six years since 1960. (not a D or R issue) The 2009 Great Recession saw a deficit of $1.42 trillion and later with the pandemic it jumped to $3.13 trillion in 2020-stimmies, PPP, other support programs. This year, the deficit is anticipated to be about $1.9 trillion — 6% of GDP in a close to full employment economy. Recent Treasury data shows that between October 2024 and the end of June 2025 spending was $5.35 trillion, and revenues were $4.01 trillion — take in 75 cents and spend a dollar. How do we fill the gap? Borrow-sell bonds, notes and bills in some combination. The national debt stands at about $36 trillion — we hit the debt ceiling in January and changing that was part of the OBBB process, adding $5 trillion to the ceiling. 

Where does the spending go? In Fiscal 2024 spending was $6.8 trillion. Social Security, Medicare, Medicaid and other income security was $3.353 trillion, Defense was $850 billion and net Interest was $881 billion. Note interest was higher than defense and is expected to hit $1.2 trillion this year. With higher interest rates and more debt (the annual deficit), more will be spent on interest, which means pressure on other federal spending. Long-term rates rose after the Fed cut short rates last fall reflecting in part inflation fears and deficit worries. 

Selling bonds and bills has heretofore been easy — insurance companies, banks, foreign governments, global investors, mutual funds, individuals (including some readers of The Press) and the Federal Reserve. There are suggestions that the situation might change. In the chaos after April 2, the dollar would have been expected to rise and interest rates fall as people sought safety, but that did not happen. U.S. debt has been downgraded again. Our reserve currency position is under threat, but so far, no satisfactory alternative has evolved. Some adversaries and I am sure others, who are upset with our behavior, are trying to find alternatives. If people and institutions are less willing to hold dollar assets or do not trust the system, there would be upward pressure on rates. Homebuyers, actual and potential, have been collateral damage in the current situation. 

The nation could create new money to buy the debt, but that is a recipe for inflation and a reason that independence of the Federal Reserve is critical. We are watching the Fed under attack once again (Nixon, Johnson, etc.) with potential inflationary consequences for the nation. Inflation erodes the debt, reducing its real value — a taking from the parties that bought it.  

Once again, we kicked the can down the road. What we are doing is not sustainable, but no one knows how long It can go on. Sorry granddaughters!

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John W. Mitchell is a Coeur d'Alene resident.