Deficit Heat

Whenever the temperature here in DC pushes into its mid-summer ascent, I’m reminded of a short story I first read as a 12-year-old called “August Heat” by W.F. Harvey. Short enough to be a Substack post if written today, the tale recounts a meeting of two strangers who spend a stifling day circling toward an end neither of them chose or can fully explain. Nothing dramatic happens for most of it — just heat, building, oppressive and relentless, until it’s done enough damage to unbalance a man’s judgment entirely. Nobody points to the moment it became too much. It simply was, eventually, and by then it was too late to do anything about it.

The calendar just turned to August, and that story has been on my mind. Not just because of the weather, but because we seem to be following a similar trajectory with the ever-rising U.S. national debt.

Unfortunately, we’ve grown far too accustomed to talking about the national debt the way we talk about a distant hurricane — a huge storm building somewhere out there, remarkable to watch form and grow, but easy to forget about when the sun continues to shine overhead. But heat doesn’t work like a storm. It doesn’t arrive. It accumulates. That’s closer to what’s actually happening with federal borrowing. Nobody is (probably) going to wake up to a debt crisis the way you wake up to gale-force winds. We’re more likely to simply find, at some point, that the heat has already done its work — that judgment was substantially impaired, that decisions were made that can’t be unmade, and that no single president or Congress bears the full blame.

The day the money runs out

I’ve been kicking around a way to track the temperature rise.

Call it National Fiscal Exhaustion Day — the point in the calendar year when cumulative federal revenue is depleted if spending were spread evenly across the year. It runs on the same logic as Tax Freedom Day, but in reverse: Tax Freedom Day marks how long the average household works before its earnings cover its tax bill. This is the government’s version, marking how long it can operate before the tax revenue generated by those households (and other sources) runs out.

This year, that day lands somewhere around mid-to-late September. So that means we’re broke by the end of summer and forced to borrow to pay for everything else for the remainder of the year.

Not to say that some reasonable level of borrowing isn’t prudent and practical; it absolutely can be, particularly if the amount you owe is increasing at a lesser rate than the growth of your income and income-producing capacity. That’s the difference between debt you grow out of and debt that grows on top of you. Right now, federal debt is doing the latter — growing at a rate that far outpaces GDP growth.

Picture your own finances working that way. Imagine your paycheck stopped arriving after Labor Day — not reduced, stopped — and every expense from that point through the end of December had to go on a credit card. Rent, groceries, the electric bill, gas for the car. You’d still be spending at the same pace; you just wouldn’t have your own money to spend anymore. That’s roughly the position the federal government is in every year, only the “credit card” is Treasury debt, and the interest doesn’t reset when the calendar flips to January. It carries forward, compounding, into next year’s borrowed months.

That alone might not alarm anyone. What should cause folks to take notice is where the date has been, and where it’s going.

A date that keeps moving earlier

For much of the first 15 years of the 21st century, the fiscal exhaustion day fell late in the year (typically Nov/Dec), outside of 2009 and 2010 when the Great Recession caused tax collections to crater. Over the past 10 years, however, the date has moved up to a new normal (typically Sep/Oct), even when omitting the Covid years of 2020 and 2021. That’s not a single bad year. That’s a trend.

To be sure, the fiscal exhaustion date I’m playing with here is a simple device. The government doesn’t use the calendar year as its fiscal year, and the notion that revenues and spending are spread evenly through the year is not quite right. Moreover, nobody should treat specific dates as precise predictions. The point isn’t the day of exhaustion. It’s the direction, and how policymakers are unable or unwilling to reverse it.

There’s a certain irony in writing this in August. The heat hasn’t broken yet this year, and neither has the fiscal trend — both just keep building, day by day, in a way that’s easy to stop noticing precisely because nothing about any single day feels different from the one before it. That’s the mechanism of the madness in Harvey’s story, too: not a single unbearable moment, but an accumulation so gradual that the mind adjusts to each new degree right up until it can’t.

None of this results from a lack of good ideas. I’ve spent a fair amount of time lately with a working group of former budget officials sketching out real, substantive fixes to how Congress and the executive branch actually manage the money — clearer accountability for the choices being made, better tools for weighing tradeoffs, structures that might make the numbers harder to ignore. The reforms are as good as they come. What’s uncertain is whether any of them can survive contact with the incentives actually in place. Is good budget process design a lever anyone in power has a reason to pull? Having the right blueprint has never been the hard part of fiscal reform. Getting anyone to feel the heat is.

It’s not just the benefits. It’s the interest.

There’s an oft-repeated saying that the U.S. government has evolved to the point where it has become a large insurance company with an army. It’s hard to argue with that. If you take all of our mandatory benefit programs and combine those with defense spending and interest on the national debt, you have about 86% of the federal budget right there.

And the fastest-growing category is net interest — the cost of servicing debt already on the books. Budget forecasters project it roughly doubling in dollar terms over the next decade and continuing to climb after that. By mid-century, interest could consume more than a quarter of all federal revenue.

That’s the part worth pondering more deeply than the calendar trick. We’re not just spending more than we take in. We’re spending an increasing share of what we take in, taxes and borrowing alike, on expenses we’ve already incurred. It compounds, literally and rhetorically. Pretty much the fiscal equivalent of a room that never cools, because every degree of heat generates a little more heat of its own.

Feeling the heat

Harvey’s story is told as a diary entry, written by the protagonist, Withencroft, in real time as the night unfolds. It doesn’t end with a described act of violence. It ends with him writing, in the room with Atkinson, who is sharpening a chisel nearby: “It is after eleven now. I shall be gone in less than an hour. But the heat is stifling. It is enough to send a man mad.”

And then — nothing. The account simply stops. No expansion on the fear, no resolution, just a narrator who was mid-thought and, for reasons the text never states, isn’t anymore.

That’s a better metaphor for the debt than any gathering storm would be. Nobody is going to narrate the moment the trajectory becomes unrecoverable. There won’t be a final entry that says so. And it may not be sudden.

As for the reform ideas — the ones that could actually bend this trajectory — they’re sitting there, ready, waiting for someone in a position to act to feel the heat enough to