- President Trump, the Democratic presidential candidates, and Congress aren’t taking the national debt seriously.
- But the rapidly expanding debt is a threat to America’s economic and national security.
- Maya MacGuineas is the president of the bipartisan Committee for a Responsible Federal Budget.
- This is an opinion column. The thoughts expressed are those of the author.
- Visit Business Insider’s homepage for more stories.
The national debt is an issue that lawmakers are doing their best to ignore these days—as demonstrated by the President’s non-serious budget, the House’s plan to not even pass a budget, and the leading presidential candidates’ not feeling the need to have a plan to fix it.
In isolation, the debt is not the largest threat facing the nation.
On the external front, there are attempts by Russia to weaken our democracy and China continues to employ aggressive tactics to gain economic advantage. The climate threat is growing rapidly and the downsides of technology are becoming more apparent. Domestically, income inequality is reaching untenable levels and our governance system is basically non-functioning..
But the large national debt is the threat that makes dealing with each and every one of these more difficult. Ideally, we would have available resources to deal with these challenges and some cushion if our economy were to take a hit in doing so. But as it is, with our debt already at near-record levels, we are facing these challenges at a serious disadvantage.
The annual deficit is the worst it has ever been when the economy was this strong. We are on track to borrow another $14 trillion over the next decade, and already, interest payments are the fastest growing part of the budget.
This situation has economic consequences that ripple to all areas of our national strength. Excessively high levels of debt can slow economic growth by crowding out private investment in favor of public debt and limiting the government’s flexibility to respond to a future downturn or crisis.
In addition, when one is dependent on other nations for a good portion of our borrowing and domestic investment—as we are—it means the economic gains and interest payments leave our economy and flow abroad. Our debt leaves us dangerously unprepared to fight the next recession. It is also worth noting that China owns $1 trillion of our Treasuries.
What is most alarming is what our existing debt keeps us from doing. Whether we are shoring up our election systems against foreign manipulation, breaking our economic dependency on China, or altering our energy policy to improve the environment, we will need new resources and may simultaneously have to face a period of slower economic growth.
Of the many investments we need to make to strengthen our situation, we cannot afford them either in terms of available resources or the borrowing capacity required to help spread the costs. We should be getting our fiscal house in order while the economy is relatively strong, but instead we appear to be doing nothing.
Despite this, there is an ever-growing unwillingness to deal with the national debt based primarily on our political dysfunction, and the number of excuses keep on growing.
In December, Congress passed a budget that contained a half trillion dollars in tax breaks (some retroactive, some blatant political pandering to special interests and powerful constituencies, and some that will increase the costs of healthcare further) and $2.2 trillion in spending increases.
The new budget was on top of an additional $1.9 trillion in tax cuts adopted in late 2017 as part of the Republican-passed Tax Cuts and Job Act. All told, Congress has passed $4.7 trillion in additions to the national debt in the past three years.
The justifications for all this borrowing have been nonsense. Here are just a few of these doozies:
- Tax cuts pay for themselves: They most certainly do not — increased federal revenue generated through boosted economic growth is estimated to cover about one-fifth to one-quarter of their costs — and people who push the narrative that tax cuts are self-financing either have a dubious understanding of tax policy, or are lying.
- Low interest rates mean we should keep on borrowing. Policies from tax reform to infrastructure have a stronger effect on economic growth if they are paid for rather than debt-financed. And further borrowing means that we will be even more vulnerable to an uptick in rates—already a one percentage point increase in rates above what is projected leads to $190 billion more in interest payments per year. Certainly there are times to borrow, like in a recession or unforeseen emergency. But just because it is cheaper doesn’t mean shifting the costs to the future is fair or sensible.
- We should have a smaller government. The way to do that, if it is your preference, is to cut spending, which has increased 17% since Trump entered office. Cutting taxes without cutting spending leads to higher levels of spending from the added interest.
Bogus excuses may be politically convenient, but they are still bogus. It’s political pandering at its best and governing at its worst.
The challenges we face at this moment in history are too serious to allow this abdication of leadership to continue. There are so many critical threats on the horizon, and getting our fiscal house in order is a necessary first step in addressing them. Our failure to address our debt threat greatly increases our vulnerabilities on these other fronts.