The federal government must operate within its means

When a crisis hits, people do whatever they can to help. The same applies to the coronavirus pandemic we’re facing now. Additionally, we are looking for financial help from the federal government, and as a result, the Federal Reserve is running the printing presses and the Treasury will borrow trillions of dollars. 

The additional debt accrued because of the stimulus packages passed to provide relief from the crisis will be tacked on to the more than $113 trillion of debt the government was committed to before the crisis. This is according to Truth in Accounting’s “Financial State of the Union 2020” report, an organization that I founded and serve as chief executive officer. 

The $113 trillion figure is derived from the Financial Report of the U.S. Government, which is issued by the Treasury Department and Office of Management and Budget and audited by the Government Accountability Office (GAO).

While many people focus on the reported debt of $24 trillion, this number does not include the trillions of dollars already promised to our seniors. The coronavirus has confirmed the physical vulnerability of this segment of the population, but they are financially vulnerable as well.

Current and past presidents and members of Congress have not funded all of the promises they have made to our seniors. Under the government’s current plan $52 trillion of health care costs have been promised beyond the future tax revenues dedicated to paying these benefits. The same is true for $37 trillion of Social Security benefits. 

In other words, while seniors are counting on these benefits, the government has not specified where it is going to get the more than $89 trillion to pay them. The same is true for more than $8 trillion in retirement benefits owed to our veterans and federal employees, and of course, there is no plan to pay off these obligations.

While the government also has no plan to pay $17 trillion of publicly held debt we owed before the current crisis, we are incurring hundreds of billions of dollars in interest payments each year. Last year the federal government paid more than $400 billion on interest payments alone, which is almost four times more than it spent on education. By 2030, interest payments will reach $1 trillion.  

On March 12, before the crisis, the head of GAO, U.S. Comptroller General Gene Dodaro, testified before the Senate Budget Committee. He highlighted that, “We are very leveraged at a time we are going to be facing steady annual deficits of a trillion dollars a year for as far as the eye can see.” Then he warned, “We believe the current path is unsustainable.” 

This raises many questions. 

First, what does he mean by unsustainable? Second, where are we going to get more than $2 trillion to fund the stimulus package and the trillions of dollars that will be needed to rebuild our economy? Third, how long can we sustain the high level of debt we have? Finally, with all of this borrowing, how soon is our day of reckoning?

Many Americans are now kicking themselves for not heeding the recommendation they should have had three to six months of emergency money set aside. Like them, instead of having money set aside for emergencies, the federal government is in debt to the tune of trillions of dollars. These are scary times made even more dire by our lack of financial preparedness. 

To provide the necessary financial security Americans deserve, the federal government must learn to live within its means and start to pay down the federal debt. 

Going forward the Treasury Department needs to establish an emergency fund to handle future crises. To set up such a fund, during good economic times businesses and citizens have to be willing to sacrifice current services and benefits or pay additional taxes. If people aren’t willing to make these sacrifices before a crisis hits, then we need to re-think the costs we expect the federal government to cover. 

Sheila A. Weinberg is a certified public accountant. She is the founder and chief executive officer of Truth in Accounting, a nonprofit government finance watchdog organization.