The House Israel aid package has one funding source

The views and opinions expressed are solely those of the author.

The House of Representatives recently passed a bill to provide $14.3 billion in federal aid to Israel. Spending bills typically do not include a funding source, meaning the funds will have to be borrowed, increasing both the annual spending deficit and the public debt. This time a more sensible approach was taken.

The bill had the support of all but two Republicans and twelve Democrats, making it bipartisan. The unusual part of the bill is that it included a funding source. That means it won’t add a single dollar to the deficit or public debt. This is a sensible approach.

For decades, but especially since the huge annual spending deficits that began in 2010, the federal government has struggled with methods to reduce the deficit and slow the rate of growth of the public debt. Although nearly all lawmakers favor debt relief, no solutions have been implemented.

The result is that public debt has soared. In 2009 the total public debt was approx 12 trillion dollars. This total has been accumulating since the 1940s. By 2023, the public debt had risen to $33 trillion, nearly tripling in 14 years. All Americans knew that something had to be done to reduce annual deficits and slow the growth of the debt.

For all the rhetoric of the last 15 years, nothing was done. Annual deficits in excess of $1 trillion were accepted.

The resulting total now costs American taxpayers nearly $500 billion a year in interest expenses. This number will increase substantially in the coming years. This will happen for two reasons.

The Congressional Budget Office projects annual deficits over $1 billion annually in each of the following ten years. Worse still, the interest rate on future debt will result in a doubling of annual interest within a decade. The reason is that as the amount of debt grows, the cost of debt grows much faster.

When an annual deficit occurs, the government finances it by selling 10- or 20-year Treasury bonds. The $20 trillion in debt taken out over the past 13 years carried an interest rate of 1 ½%. Today the interest rate is triple. As inflation is likely to remain stubbornly high for at least the next few years, high interest rates will continue. This means that the annual interest expense will increase rapidly.

There is no program to ever pay off this debt. Thus, when a 10-year bond with an interest rate of 1 ½% matures, new bonds are sold to pay off the maturing bonds and the debt is renewed. The new bonds have a rate of 4½%, so the annual interest expense on the new debt is three times greater than the debt it replaced.

A responsible government leader would seek a solution before interest spending consumes $1 trillion a year. A reasonable solution is for the government to approve a funding source for each new spending bill. This means that spending can occur without increasing the deficit.

This is exactly what Congress did when it passed the Israeli aid package. In that case, Congress said the recently approved $80 billion for the IRS was excessive. It is excessive mainly because the vast majority of taxpayers Don’t cheat on your tax returns. That means the IRS doesn’t need $80 billion in additional funding.

Some will disagree with this statement. Some say higher earners don’t pay their fair share of income taxes, instead finding loopholes that allow them to pay less. The obvious answer then is to close the loopholes instead of arming the IRS.

Some like the New York Times columnist Paul Krugman say that taking funds from the additional $80 billion given to the IRS”it would undermine the Internal Revenue Service’s ability to crack down on wealthy tax cheats. This should be a major scandal.”

This is a bunch of poppies from an economist who believes that wealthy, successful Americans are constantly taking advantage of the average taxpayer by cheating on their taxes.

Congress took a responsible step when it tied a funding source to spending increases. This example must be followed before the public debt becomes too great a burden for our children and grandchildren.

Dr. Michael Busler, Ph.D. is a public policy analyst and professor of finance at Stockton University, where he teaches undergraduate and graduate courses in finance and economics.

Last messages from Michael Busler (see everything)

We have zero tolerance for comments that contain violence, racism, profanity, profanity, doxing, or rude behavior. If a comment is spam, instead of replying to it, click the ∨ icon below and to the right of that comment. Thank you for engaging with us in a fruitful conversation.

JOIN OUR NEW COMMENT SYSTEM! We love hearing from our readers and invite you to join us for feedback and good conversation. If you’ve commented with us before, we’ll need you to re-enter your email address for this. The public won’t see it and we won’t share it.