President Joe Biden’s $1.9 trillion “American Rescue Plan” was passed under the guise of responding to COVID-19. In reality, less than 10% of the bill was for public health.

The massive “stimulus” package was stuffed with partisan special-interest payoffs for liberal priorities and other wasteful spending.

Significantly, the law will spend nearly $1.9 trillion without a plan to pay for it. That means that, unless Congress passes new laws with equal or greater reductions in spending by the end of the year, statutory pay-as-you-go (aka “PAYGO”) enforcement will kick in.

The basic premise of statutory PAYGO is straightforward. In the words of former President Barack Obama, who championed the policy and signed it into law, it tells Congress: “You can’t spend a dollar unless you cut a dollar elsewhere.”

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If, over the course of a year, laws are enacted that are projected to increase the deficit, statutory PAYGO requires that deficit increase to be paid for by automatic spending reductions (known as sequestration) over the next several years.

However, most spending accounts and programs are exempt from sequestration.

The law has fairly significant flaws, and it would be better to replace it with a more robust fiscal rule that more effectively restrains excessive spending. Politicians of both parties have abused loopholes, adding higher spending without paying for it.

The Congressional Budget Office estimated that because of the large amount of spending in the stimulus law, statutory PAYGO would require a sequestration order to reduce spending by $381 billion next January.

That actually exceeds the total amount of the spending accounts that are subject to sequestration because most major programs are exempted or are capped.

Now that Democrats have enacted their $1.9 trillion spending binge, they do not want to pay for it.

Rep. John Yarmuth, D-Ky., chairman of the House Budget Committee, has introduced a bill that would declare that the stimulus bill “shall not be counted” on the PAYGO scorecard. In effect, it would attempt to pretend that the deficit-financed spending spree for special interests never occurred.

The bill is pitched as a “legislative fix to avert sequestration.” It isn’t a “fix.” It is fiscal recklessness.

Yarmuth said, “If Republicans play political games and don’t do their jobs, Medicare and the seniors that depend on it will pay the price.”

Of course, nothing could be further from the truth.

The CBO estimates that the sequestration order could reduce total Medicare payments to providers and insurance companies by just 4% of the $943 billion that will be spent on Medicarenext year.

Not a single Republican voted for the stimulus. The limited reductions in Medicare spending as a result of the Democrats’ overspending would be enforced by the terms of Obama’s statutory PAYGO law and carried out by Biden’s director of the Office of Management and Budget.

Members of Congress who voted against the irresponsible $1.9 trillion spending bill should not feel pressured to excuse that fiscal recklessness by voting to waive statutory PAYGO enforcement. Simply waiving it retroactively would be just as irresponsible as the spending bill itself.

The potential of sequestration does, however, present an opportunity to implement much-needed fiscal responsibility in a more thoughtful way.

There are a number of smart policy alternatives to achieve spending reductions of equal or greater amounts of savings over time than would the blunt instrument of a sequestration order:

• The Heritage Foundation’s “Blueprint for a Responsible Post-COVID-19 Budget” and “Blueprint for Balance” both provide a menu of policy options to eliminate programs that do not carry out proper constitutional powers, and to cut waste and achieve better results for the taxpayers.
• Congress could repeal the most egregious items from the stimulus that clearly have nothing to do with public health—such as the nearly $90 billion in bailouts for mismanaged union pension plans or the $360 billion in bailouts for state and local governments—to offset all or portions of annual sequestration orders.

It’s vital that policymakers start to turn the tide against overspending. Even before the outbreak of COVID-19, the federal budget was on an unsustainable path due to the growth of spending outpacing the growth of the economy.

The CBO’s “Long-Term Budget Outlook” showsthat even though tax revenues are projected to rise above normal historical levels, spending will continue to grow out of control.

The national debt has skyrocketed to $28 trillion, about $225,000 per American household. The public debt is already at its highest level relative to the national economy since World War II, but unlike the postwar period when spending fell back to more normal levels, spending and debt are projected to only continue rising.

The CBO says that the current fiscal trajectory would “reduce business investment and slow the growth of economic output,” and would “increase the risk of a fiscal crisis.” But more important are the negative consequences of government that grow too large and burdensome for families and communities.

When the federal government grows beyond its proper limits, and spends and taxes too much, it stifles prosperity, infringes on liberty, and makes it more difficult to live the American dream.

Given all that is at stake, pretending the $1.9 trillion spending bill never happened and retroactively waiving statutory PAYGO enforcement would be beyond irresponsible. However, Congress can and should take advantage of the opportunity to implement thoughtful fiscal responsibility.

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Did you know America is going bankrupt? Most people don’t. Maybe the saddest part about our country’s state of affairs is that all our vitriol and dysfunction has come at a time when we aren’t even addressing our biggest problems.

It would be one thing if America collectively decided we have to be honest about where we are as a country and we were in the middle of a charged debate about how to fix it. Instead, we are fighting about trivial things while pretty much everyone in the country, on all sides of the political spectrum, has decided our real problems are so bad we may as well ignore them.

Have you ever had a friend who’s had some horrible, embarrassing event in their life? The last thing you want to do is mention it. That’s America and our debt problem. It’s so bad that we don’t talk about it anymore.

It was a full 10 years ago that we were so focused on our debt that then-President Barack Obama was forced to set up a national commission to deal with it.

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The bipartisan commission led by former Bill Clinton chief of staff Erskine Bowles and former Republican Sen. Alan Simpson came up with a series of recommendations, including tax hikes and reforms to our entitlement programs. They were attacked by both the right and left, and none of the solutions were enacted into law, but at least we were trying.

When the Bowles-Simpson commission was formed, America was about $13 trillion in debt. Today, we owe more than double that, more than $26 trillion.

Those numbers are so big nobody understands them. To put it in perspective, our entire economic output in 2020 was $21 trillion. If America could magically not spend a dime—nobody bought anything, including food or other staples—and we put it all toward paying off our federal debt for an entire year, we still wouldn’t pay it off.

In more personal terms, our federal debt now amounts to more than $81,000 for every single person in the country, or over $227,000 for the average household in America.

If the problem is twice as bad as it was 10 years ago, why don’t we even discuss it anymore? It’s as if we are so close to the iceberg that it’s too late to avoid it. Let’s just keep the band playing and enjoy things while we can. It’s all going to be our kids’ problem.

This is, of course, a fundamentally anti-American sentiment. The goal of leaving things better for your kids is as American as apple pie. We are certainly not doing that anymore.

Our national desire to wish our problems away is so severe that we have even come up with an intellectual framework for it. Modern Monetary Theory, or MMT, is the belief that deficits and debt don’t really matter for a sovereign country that can print its own currency. Need more money? You just keep printing more. It’s like magic. The bill never comes due.

MMT proponents ignore or explain away the downside to the constant printing of money and issuance of debt, including our creditors losing faith and no longer buying our bonds, hyperinflation, and the consequences for the dollar as an exchange traded currency. Despite these huge flaws, it’s amazing the extent to which MMT has caught on as a convenient political excuse to continue ignoring our imminent debt disaster.

What will happen in a debt crisis; why are we ignoring this obvious and impending catastrophe; and what should we do about it?

At some point, as we continue to borrow money, the interest we pay on our debt will be so high we will not be able to afford the rest of our budget. The solution will be to borrow more.

As the borrowing binge grows, those buying our bonds will grow worried and demand a higher return. This, in turn, will create a vicious debt cycle, which has already happened in many countries around the world. The result is catastrophic reductions in spending and increases in taxes to try to satisfy creditors to keep the money flowing.

The only reason we haven’t seen it yet in America is we are such an economically powerful country that our creditors have not yet lost faith in our ability to pay it off. If that day comes—and unless we make changes, it eventually will—the crisis is going to hurt all Americans.

We are ignoring our looming debt crisis because it’s not a winner politically. Both parties contributed to the problem.

The Bush, Obama, Trump, and Biden administrations will all be to blame. Republicans, traditionally the party of fiscal responsibility, have lost all credibility on the issue. After shutting down the government over spending under Obama, they spent happily at record levels under President Donald Trump.

It’s attractive for politicians to keep taxes low and spending high. Each of our last four presidential administrations has benefited from this dynamic.

Wall Street and global business, which dominates Washington policymaking, have also benefited greatly. These corporate actors care about their next financial quarter a lot more than our country’s state of affairs 10 or more years down the road.

This period will be looked upon by historians as the saddest time in our history: a once great country behaving so selfishly and with such short-term interests that they sold their children’s futures away with barely any debate.

The biggest cop-out in Washington is the presidential commission. It rarely accomplishes anything. Yet our situation is so bad that another bipartisan commission may be our best bet.

The commission should include both corporatists and populists. As much of a cop-out as this is, we are not prepared to begin debating real solutions (which will involve some pain). Shining a light back on the problem may be all we can accomplish today. We should start.

The combination of unified control of the federal government along with the COVID-19 pandemic has seemingly caused some elected officials to think there are no consequences to new spending proposals. However, they must wake up to the dangers posed by recklessly adding to the national debt.

On Thursday, Majority Leader Charles Schumer, D-N.Y., exemplified this mindset by saying, “The dangers of undershooting our response are far greater than overshooting it. We should have learned the lesson, from 2008 and 2009, when Congress was too timid and constrained in its response to the global financial crisis.”

>>> What’s the best way for America to reopen and return to business? The National Coronavirus Recovery Commission, a project of The Heritage Foundation, assembled America’s top thinkers to figure that out. So far, it has made more than 260 recommendations. Learn more here.

This is wrong on several fronts.

The Left has declared war on our culture, but we should never back down, nor compromise our principles. Learn more now >>

First, the stimulus spending that took place in the wake of the Great Recession was ineffective at creating jobs, and in some ways slowed the economy by creating perverse incentives and crowding out private activity.

Second, despite the difficulties associated with the pandemic, the economy is currently in much better shape than it was during the last recession.

The national unemployment rate hit 10% in October 2009 and stayed above 8% through August 2012. In contrast, the COVID-19 recession caused unemployment to spike to 14.8% in April 2020, but it fell below 7% by October.

Third, Congress has already approved over $4 trillion in response to the pandemic, much of which is still available or in the process of being distributed. The idea that Congress has been “undershooting” the response is ridiculous.

Most importantly, Schumer and other leftists in Congress are ignoring the very real danger posed by adding to the $27.8 trillion federal debt, which is over $210,000 for every U.S. household.

Even after the pandemic is over and the economy returns to normal, we will face serious problems as a result of the federal government’s broken finances.

Over $21 trillion worth of federal debt obligations are traded on the open market. While interest rates are low today, Congress has no control over what those rates will be as the debt turns over and requires refinancing.

Credit rating agencies are growing concernedabout the sustainability of America’s finances. If demand for our debt goes down, that will force the Treasury to offer higher interest rates.

Higher interest rates on so much debt would add up very quickly, which makes this a serious risk to economic growth and future prosperity. That means we need to put an end to massive deficits and eventually shrink the debt, either in absolute terms or in relation to the size of the economy, to reduce the risk to current and future generations.

This will be impossible unless legislators address the driving force behind long-term debt and deficits: unsustainable benefit programs such as Social Security and Medicare.

Major trust funds will run dry all too soon. Medicare Part A (hospital insurance) goes broke in 2024, Social Security Disability Insurance in 2026, and the Social Security retirement fund in 2031. These are programs that tens of millions of people rely on, and trust fund insolvency would cause serious upheaval, especially for Social Security.

Annual deficits for the federal government and these major benefit programs are too large to close overnight. Deficits were already high during the years of strong economic growth prior to the pandemic, and then exploded in 2020.

Reforms aiming to slow the growth of spending on Social Security and Medicare can have a significant effect, but only if those reforms are in place several years before the trust funds run out. The longer we wait, the more drastic the necessary changes become.

Besides reforming large benefit programs, there are many other ways for Congress to improve the nation’s financial health. These include refocusing the federal government on core priorities, eliminating wasteful spending, returning to a regular budget process, and strengthening economic growth.

What would not help this massive and growing problem is spending trillions of dollars we don’t have on more “relief” legislation that would do little to help the economy. Hopefully Congress will come to its senses and recognize that it has a responsibility to use taxpayer dollars wisely.

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