The Growing National Debt: It’s Worse Than We Thought
I’ve talked a lot on the campaign trail about the growing national debt that the next generation will be saddled with and how, if it isn’t addressed, it will be a drag on future economic growth. Interest payments alone on the debt threaten to consume so much of the federal budget that future generations simply won’t be able to afford the same level of social services we have today, including education funding, Medicare, even a strong military. It’s why I strongly believe millennials need to get involved in this year’s election, they have so much at stake.
But even I didn’t realize how bad the situation is until I read the latest report by the non-partisan Congressional Budget Office. The report presents stark and gloomy details of what’s facing us from years of irresponsible tax and spend policies by both parties in Congress. According to the CBO:
- At 78 percent of gross domestic product (GDP), federal debt held by the public is now at its highest level since shortly after World War II. (Many economists believe that debt over 70% of GDP is a threat to financial sustainability.)
- If current laws generally remain unchanged, growing budget deficits will boost that debt sharply over the next 30 years; it will approach 100 percent of GDP by the end of the next decade and 152 percent by 2048. That amount would be the highest in the nation’s history by far.
- Moreover, if lawmakers changed current law to maintain certain policies now in place—making the recent cuts in individual income taxes permanent in 2026, for example—the result would be even larger increases in debt.
- Interest payment on the debt are projected to climb sharply as interest rates rise from their currently low levels and as debt accumulates. Within 30 years, interest payment would about equal the amount we spend on Social Security, currently the largest federal program. In other words, the largest expenditure in the Federal Government will be interest payments on borrowed money.
- According to the CBO, the prospect of large and growing debt increases the risk of a major financial crisis and would limit the ability of the government to respond.
So, with nearly every candidate running for higher office over the last 10 years pledging to be “fiscally responsible” and some even promising to erase the nation’s deficit, how did we get here? There’s plenty of blame to go around.
The CBO report places much of the blame for our spiraling debt on the recent tax cuts that, with no offset cuts in spending, will add nearly $2 trillion to the nation’s debt. While there are some things about the tax cuts I agree with – lower corporate tax rates, for example – perhaps the worst thing about the tax cuts is that they are not paid for. Congress doesn’t seem to understand basic accounting: a tax cut reduces federal revenues, the amount of money the government takes in to pay for all of its operations. So when you reduce revenues by $2 trillion, it would make sense to likewise reduce spending.
But very little of what Congress does makes sense. Shortly after passing the tax cuts, Congress passed a record $1.3 trillion spending bill that included huge increases for defense and domestic programs. Along with the nation’s aging population that will require even greater spending on Social Security and Medicare in the future, Congress’s continued inability to rein in spending is why we are nearing the fiscal cliff the CBO is warning us about. In fact, spending for all of the government’s programs and activities, combined with net interest costs, is projected to account for a larger percentage of GDP in coming years than it has, on average, over the past 50 years.
So what do we do? It really comes down to is political will. Our elected representatives in Congress lack the courage to make tough choices about taxing and spending that would at the very least lessen the impact of the debt and make the nation’s fiscal picture sustainable. We had such a plan back in 2010 with the Simpson-Bowles commission on fiscal responsibility. The group’s bi-partisan report was a thorough, realistic remedy for putting the national debt on a stable and downward path. But in the end, it was rejected by lawmakers who were more interested in winning partisan arguments and appealing to their base.
There are a number of other things Congress could do about the budget process itself that would help curtail out-of-control spending, as proposed by the Committee for a Responsible Budget. Simple common-sense things like making the budget process more transparent, adhering to deadlines, focusing more on long-term goals instead of short-term gratification, and getting rid of budget gimmicks.
But the saddest thing, I believe, about our massive debt is what it means for future generations, our kids and their kids, the ones who will be paying a high price for the reckless spending by their elders. All the money that the government will be spending in the future just on the interest on the debt is money that will be robbed from school budgets, from making health care more affordable, from rebuilding the nation’s crumbling roads, bridges and ports. The burdensome debt is something they will have to contend with, not us, and that’s a true dereliction of duty by our country’s leaders.
That’s why it’s time to elect non-partisan members of Congress who will look out for the concerns of all the people, young and old, not just their donors and moneyed special interests. And next time you hear a candidate from one of the major political parties call themselves a “deficit hawk,” take it with a big grain of salt.