Budget expert explains why the government is borrowing so much money

Higher debt means lower wages, higher interest rates, and fewer opportunities, says Romina Boccia of the Cato Institute.

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The federal government is on track to borrow nearly $2 trillion this year. And while that budget deficit is a major concern for many Americans, the specifics of how and why the government borrows so much money can often seem confusing.

That's why Reason asked Romina Boccia, director of budget and entitlement policy at the Cato Institute, to break it down into more manageable morsels.

So why does the federal government borrow so much? Because "it's much easier for Congress to promise benefits to certain constituencies than to ask U.S. taxpayers to actually pay" for those benefits, explains Boccia, who also writes a Substack newsletter about federal fiscal issues.

The most expensive of those benefits are the so-called entitlement programs—Social Security, Medicaid, and Medicare—which run on autopilot and are not subject to the regular appropriations process. "Most of the spending growth now, and most of the growth in the budget deficit in the United States, doesn't come about as a result of Congress voting for spending bills but rather is automatically baked into the budget," she says.

Higher debt and bigger deficits could create the circumstances for a "severe fiscal crisis," warns Boccia. Even if that doesn't happen, the growing budget deficit can have serious consequences for Americans.

"Because debt is so high, it is actually reducing economic growth," says Boccia. That means lower wages and fewer opportunities. The higher debt is also driving interest rates higher, which means "you have to pay more in interest if you want to borrow money" for a mortgage, to start a business, or to pursue higher education.

So what can be done about this mess? Boccia says that's the "trillion-dollar question."

Channeling Milton Friedman, Boccia says the key is to give politicians the right set of incentives so that even the wrong people can make the right decisions. She favors the creation of a fiscal commission within Congress that could give lawmakers political cover to make necessary changes to Social Security and Medicare, the two old-age entitlement programs.

Those programs should be reconfigured to focus on keeping older Americans out of poverty, says Boccia, "rather than just transferring income from working Americans to retirees, regardless of need."

Producer: Eric Boehm

Video editors: Danielle Thompson, Regan McDaniel

Cameras: Cody Huff, César Báez