Rich Lowry

Joe Biden has been so good at cutting the deficit that it clocked in at $2 trillion last year.

The president likes to boast about how much he’s reduced the deficit — and, in his more careless moments, the debt itself — but he’s really presiding over a historic period of fiscal profligacy.

His self-congratulation about reducing red ink is about as reliable as his self-valorizing stories about his academic achievements, his family and his work as a senator and vice president — it all tends to be a mixed-up collection of half-remembered lore and obvious inaccuracies.

Biden was taking his victory lap when the deficit had dropped to about $1 trillion from its pandemic-era highs of roughly $3 trillion, thanks to the inevitable end of emergency COVID spending. Something, of course, that the president had nothing to do with. Now, the deficit has doubled again to $2 trillion, presumably testing even this president’s ability to give himself unearned credit.

This elevated level of deficit spending comes at a time when the economy is growing, when unemployment is low and when we aren’t at war. To create a crisis-level deficit during a period of (perhaps tenuous) peace and prosperity takes some doing. Yet Joe Biden and, it must be said, both political parties in Washington, D.C., have managed it.

As we’ve learned since the end of the Cold War in the realm of foreign affairs, vacations from history never work out. We thought we were enjoying one with the federal budget: Interests rates were low and would always stay that way, so why not keep spending money we don’t have? It’s almost free. It’d be foolish not to.

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This was the thinking, if we can call it that, behind Biden’s fiscal strategy.

The New York Times noted of his blueprint in 2021, “The budget also underscores the Biden administration’s belief that the fiscal situation is manageable, and that given historically low interest rates, now is the time to make major investments to combat climate change and reduce income inequality. ”

Treasury Secretary Janet Yellen said that what truly mattered is how much we were paying in interest payments, and since it was only about $300 billion a year, everything was fine.

Welp. Two years later, interest payments have roughly doubled to $650 billion. That’s beginning to approach what we spend on the Department of Defense — except, of course, we don’t get one tank or airplane from making interest payments.

At this pace, payments on the federal debt are on track to become the second biggest federal program after Social Security.

The spiking payments are another cost of inflation, as the Federal Reserve has hiked interest rates to tame rising prices. The rate for the 30-year bond was roughly 4% in July and now is about 5%. Every incremental increase creates yet more empty calories in the federal budget — we have to spend more simply to fund our out-of-control spending.

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It should have been foreseeable that interest rates would eventually go up again, since there was no iron law that they would remain conveniently low, and they’ve been higher within recent memory.

The worst case is that is that we remain unwilling and unable to control federal spending (plausible enough), while interest rates make that spending ever more costly in what eventually becomes an unsustainable spiral.

Perhaps this scenario will never come to pass, but the prudent thing to do is to minimize the risk by trimming our fiscal sails.

It’s a sign of the times that even New York Times columnist Paul Krugman says that we should start worrying about the deficit.

No one is pure here. The debt increased by about $7.8 trillion during President Donald Trump’s administration, and has increased by about $5.7 trillion during Biden’s tenure. “If something can’t go on for forever, it will stop,” said the economist Herb Stein.

When it comes to spending, Washington is ready to stress test that proposition.

Rich Lowry is a syndicated columnist.


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