Deficit Spending

"Many other social and economic challenges require careful analysis. . . the federal deficit and interest rates, corporate mergers and takeovers. . ." Economic Justice 21.

Woe to him who stores up what is not his; how long can it last! He loads himself down with debts. Shall not your creditors rise suddenly? Shall not they who make you tremble awake? You shall become their spoil! Because you despoiled many peoples all the rest of the nations shall despoil you; because of blood that is shed and violence done to the land, to the city and to all who dwell in it. Habakkuk 2:6-8

Demons Index.........Structures of Sin Index.......Home Index
Selected Data on the National Debt and Interest Payments Thereon
1980 total federal debt $1,250 billion
1993 total federal debt $5,452 billion
Increase in debt, 1980 - 1993 436%
1980 interest payments $52.538 billion
1996 interest payments $241.059 billion
Federal budget for means-tested programs $246,240 million
Interest payments as % of means-tested $s 97%
Increase in interest payments, 1980- 1993 458%
1980 federal expenditures $590.497 billion
1996 estimated expenditures $1.572 trillion
1980 - 1996 percent increase 266%
Source: Statistical Abstract of the United States, tables 471 and 515


The large majority of this debt (77%) has been incurred during and since the Reagan administration, when as a matter of national policy, taxes were reduced without reductions in the federal budget and in the context of a military buildup. This produced a tremendous increase in annual deficit spending, with a corresponding rise in the annual cost of interest on the debt. Prior to the Reagan presidency, interest on the debt ranked fifth in terms of categories of expenditures and was 9% of the federal budget. Now it ranks third, and consumes 15% of the federal budget. All of the money paid in interest on the debt is money that is not available for other purposes, but instead, is diverted to servicing the nation's on-going spending binge, which in turn primarily benefits the affluent (Statistical Abstract 515, 471).

This interest charge represents a transfer payment -- the redistribution of income -- to those who hold government debt. Most of the federal debt is held by institutions and persons of power, wealth, and privilege. Some is mediated to the middle class via indirect purchases (e.g. pension plans, bank investments, etc.) but the majority of the benefit does not accrue to the poor in any conceivable sense.

This creates a curious inversion of proper financial management. The individual family that consistently lives beyond his or her income and uses debt for the purchase of basic necessities is not engaging in prudent financial practices. This is no less true for community institutions such as government. By reducing taxes, and not reducing spending, the government exchanged some of the tax liability of the rich and the comfortable for a transfer payment to the rich and the powerful in the form of interest.

Thus, the political and economic elites have a vested interest in continued deficit spending, since the need of the government for funds provides a steady, virtually risk-free, investment income for those with extra cash. If the debt is small, this is hardly a moral consideration. But when the interest charges mount to their present level, deficit spending becomes a structure of sin that contributes to the general financial crisis of the federal government, and provides rhetorical ammunition for slashing the nation's commitment to the poor and the weak. If the budget deficit had increased only at the same rate that the federal budget as a whole had increased, the annual interest charge (1996 numbers) would be $101.3 billion less than is currently being paid, enough to fund AFDC, WIC, food stamps, school lunch, and the earned income credit (1994 cost for these was $64 billion). This appears to be pure venality at work in politics.

Demons Index.........Structures of Sin Index.......Home Index