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Findings and Conclusions It is clear that without either, or a combination of, substantial spending reductions (cuts) or large revenue (tax and/or tariff) increases, the current budgeting process of the federal government is not sustainable. This is not a partisan problem. The large growth of federal budget deficits and resulting debt accumulation began under a conservative Republican President in 1980 to increase defense spending, and have continued to grow (perhaps for different reasons) under both Republican and Democrat Presidents and with changes in Congressional control. Now, interest being paid on the national debt is squeezing out spending on programs that are needed and expected by the American people. This includes one of the original reasons for having a federal government - national defense. It should also be noted that re-financing the existing national debt and deficits (which are covered by borrowing) competes with private financing, and claims of investment safety have given government a borrowing advantage. To maintain this advantage, and to sustain continued financing, the federal government must favor payments to lenders over support for its programs. Solutions are available. An approach that would allow funding growth to keep up with inflation, while paying down the federal deficit and then the national debt over many years, is presented here in Table 6. But if addressing budget problems is to succeed by this, or by any other means, it needs to begin soon and would require a commitment of many years from the public, our political leaders, and lenders. And this concern is shared by federal officials. Many financial analysts are now pointing out that business as usual by the federal government is not sustainable. A good example of this is contained on page 171 of the U.S. Treasury Department's 2025 Financial Report of the United States Government. It says: "The projections in this Financial Report indicate that if policy remains unchanged, the debt-to-GDP ratio will steadily increase throughout the projection period and beyond, which implies current policy under this Financial Report's assumptions is not sustainable and ultimately must change. Subject to the important caveat that policy changes are not so abrupt that they slow economic growth, the sooner policies are put in place to slow debt growth, the smaller are the adjustments necessary to return the nation to a sustainable fiscal path, and the lower the burden that will rest upon future generations." This probably understates the scope of the problem confronting us. California's financial condition is less apparent because problems are being hidden to give the appearance of a balanced budget. But spending pushed to future years, off-books borrowing from the federal government, and reliance on future federal funding to pay for services and obligations administered by the state makes California residents even more vulnerable to federal financial problems. Denouement: Data contained in this discussion of national and California state debt was found in or calculated from on-line reports. The author claims no special financial insight but is concerned about whether the size of annual deficits relative to government income and accumulated debt compared to our economy’s productive capacity are sustainable. These concerns are also expressed by government financial analysts. Thus far, an attempt has been made to present facts, and the choice of presented information has been based on putting together a picture from which viewers can make their own interpretation. However, the subsequent discussion of Consequences comes from the picture seen by the author. |
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