The national debt is at the core of a dispute about how to raise the government’s legal borrowing authority, a mostly political argument that could turn into genuine financial trouble this summer if the U.S. runs out of accounting maneuvers to keep paying its bills.
House Speaker Kevin McCarthy insists that the debt, so huge it defies most people’s grasp, is already breaking the economy. President Joe Biden counters that the government spending cuts sought by Republicans in return for a debt limit increase would break the middle class.
The political jousting masks contrasting realities: Today’s $31.4 trillion national debt does not appear to be a weight on the U.S. economy, but the debt’s path in the decades to come might put at risk national security and major programs including Social Security and Medicare.The national debt is the accumulation over time of the yearly deficit. If the government cuts spending or raises taxes, it can trim the deficit and run a surplus, something that last happened in 2001. Lower levels of borrowing can contain and even reduce the cumulative debt.
Basic math poses a problem for balancing the budget. If tax hikes, Social Security, Medicare, Medicaid, national security and veterans’ support are off the table, every other government program would need to be cut by 85% to balance the budget in 10 years, according to the Committee for a Responsible Federal Budget, a fiscal watchdog.
The debt is largely the gap between the taxes that people are willing to pay and the benefits they expect to receive from the government. Voters generally want minimal taxes, but they also want more Social Security, health care and other programs. According to Doug Elmendorf, a former director of the Congressional Budget Office and now dean of the Harvard University Kennedy School of Government. The political jousting masks contrasting realities: Today’s $31.4 trillion national debt does not appear to be a weight on the U.S. economy, but the debt’s path in the decades to come might put at risk national security and major programs including Social Security and Medicare.
To stabilize the debt near current levels, the government would need to permanently slash all spending by 30%, raise tax revenues by 40% or some combination of both, said Kent Smetters, a professor at the University of Pennsylvania and director of the Penn Wharton Budget Model. Those changes could come at the expense of younger generations who might be stuck paying more and receiving far fewer benefits from the government than their parents.
Courtesy AP. By Joash Boak. Full text available here.
