How disputes over the federal debt and deficit could lead to a government shutdown

Amna Nawaz:

The U.S. government remains open this Thanksgiving week, thanks to a temporary funding deal Congress passed last week.

But that deal starts to expire in January. And conservatives are signaling they won't pass another funding deal without addressing a bigger issue, the swelling U.S. national debt, this as what the U.S. pays in interest costs is soaring.

Geoff is with our Lisa Desjardins to make sense of the trillions involved.

Geoff Bennett:

Amna, thank you,

Lisa, it's good to see you.

Lisa Desjardins:

Great to see you.

Geoff Bennett:

So, we know the top-line number.

The total national debt is almost $34 trillion. But economists have noticed that something is changing, right? So what is it?

Lisa Desjardins:

It's the cost of the debt.

And if you look at the markets, you know why. To fight inflation, the Federal Reserve has been increasing interest rates. Well, that means what the U.S. is paying for its loans is also going up. I wanted this to be very understandable. So I want to look at interest costs that we pay on our national debt per day.

Now, I have calculated these numbers, thanks to some help from the Joint Economic Committee and Dave Schweikert's office; $1 billion, that's how much we were paying in interest two years ago. Let's watch the curve. Here we go after the pandemic. Interest rates go up a little bit, $1.4 billion a day.

Look at the last six months. As we see interest rates go up, look at what the U.S. is paying, more than twice in interest costs per day that we did two years ago. Now, $2.6 billion, what is that? Think about this. In a week, what we're paying on interest is enough for everything President Biden has requested for border security for a year.

Geoff Bennett:

Wow, so what about the total number?

Lisa Desjardins:

Right, OK, another big number.

What does this mean overall? Right now, the U.S. in a year, looking November to October in the past year, spent $749 billion on interest. What does that number mean? Department of Defense budget. How much we spent on that in fiscal 23? — $782 billion.

So, right now, just the interest on our debt is so large that it is almost the entire Department of Defense budget.

Geoff Bennett:

And, Lisa, we hear lawmakers talk all the time about the debt and deficit. How much does that debate on the Hill actually get at the core of the problem here?

Lisa Desjardins:

So excited to get into this, because, of course, Congress, as you know — we have covered it together — congress only controls part of the budget agencies, by and large.

But let's look at what the three largest drivers of the debt are in reality, these three things, Social Security there in yellow at the bottom, Medicare in blue, and interest, those costs right there. This is the percentage of the budget these things make up now.

In 2033, all three of those things are going to grow. Look at that, Social Security especially, Medicare growing. These are mandatory costs that Congress isn't even talking about when we talk about a government shutdown or discretionary funding. The green, that is what Congress controls.

That money is suspected to go down. So really what's happening here is Congress is not addressing the big drivers of the debt at all. And when you talk to economists like Mark Zandi of Moody's Analytics, he says Congress needs to pay attention to you and they need to stress the real stakes in all of this.

Mark Zandi, Chief Economist, Moody's Analytics:

The lawmakers need to be able to connect in the minds of the voter that, if we don't make changes, if we don't do things that are tough, like raise taxes or restrain spending, then interest rates are going to rise.

And, therefore, we're not going to be able to — many Americans, most Americans won't be able to afford to buy a home and become a homeowner or even buy a vehicle. So I think it's going to take some pressure, some economic pressure for lawmakers to really come to terms. But, so far, they haven't done that.

Geoff Bennett:

So, Lisa, what are lawmakers proposing as potential solutions here?

Lisa Desjardins:

Yes.

We went back and listened to the last couple of weeks of debate about fiscal policy, about a potential government shutdown that we just avoided this time around. And, first, I want to note that there are more members of Congress talking about this issue. So let's listen, first of all, of what they had to say.

Rep. Mike Johnson (R-LA):

The greatest threat to our national security is our nation's debts.

Sen. Joe Manchin (D-WV):

We have been spending more than we bring in, in our government every year for the past 21 years.

Sen. Maggie Hassan (D-NH):

As a nation, we must be concerned about the growth in the national debt.

Rep. Chip Roy (R-TX):

When is it going to be enough? Is $34 trillion of debt, not enough, $2 trillion deficits not enough?

Rep. David Sschweikert (R-AZ):

If you don't like math, if you don't want to deal with reality, please stop watching.

Lisa Desjardins:

Keep watching, because math is important, reality is important.

And the reality is, though, as much as these members have lots of graphs, they're pointing out the problem, there really are not yet specific plans to deal with this. It comes down to two things, Geoff you know well. Either you have to cut spending, cut benefits, or you have to increase revenue.

Most every smart economist says you have got to do some combination of both. But it has become a partisan debate. There is a potential commission on the horizon. Speaker Johnson mentioned that in his first speech. He wants a commission.

My reporting is, however, that that is stuck at the moment because they can't agree on what kind of teeth a fiscal commission could have. It's fine to propose recommendations, but if the Senate doesn't really have to take a vote, what does it matter? Until they can agree on that, even a commission itself is in gridlock, even as our debt continues to get more and more at the moment.

Geoff Bennett:

Lisa Desjardins, thanks so much for this great reporting and analysis.

Lisa Desjardins:

You're welcome.