The Senate is working through this weekend to pass a $95.3 billion foreign aid bill with assistance for Ukraine, Israel and Taiwan – but libertarian Senator Rand Paul may stall progress by using chamber rules to delay voting on it.
Kentucky Republican Sen. Rand Paul highlighted our nation’s $34 trillion debt as justification against further government spending.
The $34 Trillion US Debt
Rand Paul lamented in his Festivus tweet this year that the US national debt has reached $34 trillion and blamed bureaucrats and career politicians for funneling America’s hard-earned funds away into foreign wars and aid projects while neglecting border security.
In its current fiscal year, the federal government continued to spend more than it collected despite seeing income tax receipts decline by $46 billion and an unexpected one-time surge in estate taxes levied upon wealthy individuals passing away.
Interest on public debt rose during this 10-month period by $77 billion (29%), due to interest expenses outpacing tax revenue. This trend has persisted since last spring’s debt limit standoff and subsequent downgrade by Fitch Ratings of our nation’s credit rating.
As a result, millions of Americans struggle to pay their bills and put food on their tables. Congress needs to reign in spending and stop rewarding favoritism and pet projects with taxpayer funds.
The Inflation Costs
Though the Federal Reserve raised interest rates in July, inflation has subsided and may help relieve pressure on the deficit. This bodes well as it means debt servicing costs for government are less likely to skyrocket.
Over the first nine months of fiscal year 2015-16, outlays for major mandatory spending programs increased by $118 billion (7%) during this first nine month period of spending. Most of this increase was attributable to Social Security benefits receiving an 8% cost-of-living adjustment while additional increases included the Pension Benefit Guaranty Corporation making one-time payments to multiemployer pension plans, higher cost-of-living payments for veterans and Supplemental Nutrition Assistance Program beneficiaries, as well as one-time payments made directly by veterans themselves or through Supplemental Nutrition Assistance Program beneficiaries.
Moral blackmail aside, there are concerns over the integrity of Ukraine funding package that does not include corruption prevention or transparency measures. Kentucky Senator Rand Paul asserted that proponents are using taxpayer money to subsidize Vladimir Putin and called for a return to six cents-of-every-dollar budgeting process that Americans can understand.
The Interest Costs
As part of its massive budget deficit, the US government spends roughly $2 billion each day just on interest payments – this burden on taxpayers suffocates the economy by diverting resources away from private businesses toward an institution immune to profit or loss.
Recent years have seen both parties contribute to an explosion of deficit spending, led by COVID-19 relief programs and tax cuts that cut revenue. The White House blames Republican giveaways to big corporations and wealthy individuals as the source of rising debt levels.
The Committee for a Responsible Federal Budget predicts that interest costs will soon become the fastest-rising component of national budget due to rising interest rates and debt accumulation. Interest rates could hit over 4% this year – more than double their historical average; also foreign governments may reduce holdings of US bonds while credit-rating agencies may downgrade them as an indicator.
The Devaluation of the Dollar
As US debt has reached $34 trillion, American taxpayers continue to bear the costs of Washington’s spending through record inflation and interest rates – demanding an immediate plan to put our fiscal house back in order.
Bretton Woods in 1944 linked the dollar to gold as part of an international financial architecture that kept countries like Russia and China pegged to it as they couldn’t hold enough gold themselves, thus keeping their currencies pegged to US currency until its collapse during the 1970s. Yet due to deep and flexible financial markets, relatively transparent corporate governance norms, and secure political systems which make up US economy, its currencies continue to serve as major world currencies like dollar.
But this arrangement is being undermined by sanctions imposed by the US and other Western governments against Russia for their invasion of Ukraine. These “de-dollarisation” efforts aim at weaning nations away from reliance on US dollars.
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