Sid Salter
Raising the debt ceiling won’t change the fiscal realities of Social Security or Medicare, but it will protect the standing of the U.S. economy in global markets. And it will continue the mammoth federal subsidies to which the state has long been dependent.
At this writing, the debt ceiling drama – the annual political kabuki theater between Congress and the White House over agreeing on the total amount of money that the United States government is authorized to borrow to meet its existing legal obligations – continues in earnest.
As much as a thoroughly manufactured “crisis” can be considered in any way “earnest,” that is. Both sides saw this coming. Both sides are seeking political capital from it. And at the end of the day, there are few fiscally rational choices beyond an eventual extension of the debt ceiling.
Those “existing legal obligations” referenced above include Social Security and Medicare benefits, military salaries, interest on the national debt, federal tax refunds and a host of other obligations the government already owes – so says the U.S. Treasury Department.
Here’s hoping an agreement is reached before our politicians can do any real harm.
The debt ceiling was established in 1917 and has been raised 78 times since its inception. The debt ceiling is currently $31.4 trillion. This political fight occurs regularly no matter which party controls the White House or the Congress. Republicans and Democrats alike have raised the debt ceiling – and will again.
It is a moment of high political theater and is one of the times that the country pauses to consider government spending, the national debt and what those numbers say about our country’s future and the state of our national economy.
It is, in fact, not much of a national debate about federal spending nor about national and global fiscal policy. Neither is it much of a debate about substantive solutions.
Here’s the rub – the federal government spent $6.5 trillion in Fiscal Year 2022 and collected just over $5 trillion in revenues, which left a federal budget deficit of some $1.45 billion. As one might imagine, Democrats and Republicans differ on those numbers. That deficit looms in a country with a national debt of $31.46 trillion.
Balance that with the fact that the Social Security trust fund is projected to be exhausted in 2033 and will owe more than $9 trillion more in benefits than it is projected to collect from workers. Medicare is on fiscal life support and fading fast and the prospects for either program in their present forms past 2034 are dicey at best.
But, as the saying goes, all politics is local. So, what would it mean to Mississippi if the debt limit isn’t raised? What would cutting federal spending really mean for Mississippians?
For FY2023, Mississippi adopted a budget of $26.3 billion. But of that state budget, some 45 percent of it was met with federal dollars. Federal payments to Mississippi average about $6,880 per capita – ranking the state as one of the most dependent states on federal taxpayer largesse.
Specifically, federal funds in Mississippi pay for Medicaid, education, social welfare and highways. For public health care, the role of federal spending is most impactful. Three-fourths or more of Medicaid costs in Mississippi are paid by federal tax dollars.
And to give a complete perspective, Mississippi puts far, far less into the federal coffers than it takes out as a state. Mississippi taxpayers receive $2.73 back in federal spending for every dollar in federal taxes paid.
Those facts circle back to the truth that Mississippi’s state budget and much of the state’s private economy depends on federal dollars turning over in the local economies. Both would be harmed by allowing the debt ceiling political drama to go to the point of default.
If roughly half of Mississippi’s state government revenue comes from federal transfer payments, how do those state politicians plan to finance public health care, education, highways, agriculture and economic development?
Honestly informed of the consequences, are Mississippi taxpayers really willing to step up and assume fiscal responsibility for government services that have been in great measure subsidized by taxpayers in more affluent states like Massachusetts?
Raising the debt ceiling won’t change the fiscal realities of Social Security or Medicare, but it will protect the standing of the U.S. economy in global markets. And it will continue the mammoth federal subsidies to which the state has long been dependent.
Sid Salter
