Goldman Sachs CEO David M. Solomon is the latest business leader to sound the alarm on the Biden administration’s deficit spending, which comes as the cost of making interest payments on the United States’ ballooning government debt has exceeded spending in both the critical sectors of defense and Medicare.
“I think the level of debt in the United States [and] the level of spending is something that we need a sharper focus on and more dialogue around than what we’ve seen,” the investment banking chief told Bloomberg Television on May 13, adding that if something isn’t done to rein it the spending, it could create problems.
Interest spending—now the fastest-growing part of the budget—is currently greater than all the money spent on education ($128 billion), transportation ($70 billion), and veterans ($183 billion) combined.
The nonpartisan Committee for a Responsible Federal Budget (CRFB) predicted that, by 2051, spending on interest will be the largest line item in the budget. Currently, only Social Security spending ($837 billion) is greater than what’s being forked over to service the nation’s growing debt.
“Rising debt will continue to put upward pressure on interest rates. Without reforms to reduce the debt and interest, interest costs will keep rising, crowd out spending on other priorities, and burden future generations,” the CRFB said in a statement.
A number of economists, business leaders, and lawmakers have issued warnings about out-of-control deficit spending that adds to the debt load.
House Speaker Mike Johnson (R-La.) said in October 2023—the first month of the 2024 fiscal year—that it was well past time to establish a bipartisan commission to tackle the federal government’s $34.6 trillion debt.
“The consequences if we don’t act now are unbearable,” he said at the time. Despite his calls for such a commission, the project remains in limbo.
No Longer a Pandemic
In his remarks to Bloomberg Television on May 13, Mr. Solomon said that some of the U.S. government’s massive debt-fueled spending in recent years may have been justified to prevent the economy from crashing during the COVID-19 lockdowns. However, he decried the fact that even though the pandemic is no longer a factor, the spending spree continues.“The spending levels ... are continuing at a pace that I think is raising our debt level and creating issues for us down the road,” he warned.
The blueprint was panned by Mr. Johnson, who said it reflected an “insatiable appetite for reckless spending.”
Deficit spending in the United States hit $1.7 trillion in 2023, or 6.3 percent of gross domestic product (GDP), according to a recent report from the Congressional Budget Office (CBO). The agency estimated that deficit spending would grow to 8.5 percent of GDP by 2054.
At the same time, the CBO projected that the United States’ debt-to-GDP ratio, which in the 1980s was about 35 percent, will grow to 166 percent by 2054, while warning that this would pose “significant risks” to the United States’ fiscal and economic outlook.
Mr. Solomon said that the United States’ deficit spending is an issue that “deserves a lot of attention.”
“Hopefully, there will be a lot more discussion as we move through the election and into the next administration,” he said.
‘Dollar Will Be Worth Nothing’
Tesla CEO Elon Musk recently sounded the alarm on massive government spending, warning that unless steps are taken to slow down the growth of the U.S. national debt, the dollar will become worthless.Mr. Musk has repeatedly advocated a negotiated end to the conflict in Ukraine to put a halt to the loss of life.
Like Mr. Musk, billionaire investor Warren Buffett has also warned about the “important” consequences of deficit spending. However, the Berkshire Hathaway founder predicted that, when push comes to shove, the government would opt to raise taxes rather than reduce spending.
“I think higher taxes are likely,” Mr. Buffett said on May 4 at Berkshire Hathaway’s annual shareholder meeting in Omaha.
“They may decide that some day, they don’t want the fiscal deficit to be this large because that has some important consequences. So they may not want to decrease spending and they may decide they’ll take a larger percentage of what we own, and we’ll pay it,” he said.
“It is a cliff. We see the cliff. It’s about 10 years out. We’re going 60 miles an hour,” Mr. Dimon said, speaking on a panel at the Bipartisan Policy Center in Washington at the end of January.
