Our $31.4 Trillion Debt Freed to Rise Again. Will We Ever Say ‘Stop!’?

By the time George W. Bush took office at the start of this new century, the United States in its 225 year history had run up a modest debt of $5.7 trillion. Just before Bush, the Clinton administration had even notched a surplus in its final three years.

And yet in the mere 22 years since, we added a stunning $25.7 trillion to reach the current
$31.4 trillion national debt, a sum that only a troglodyte might not be aware of after the congressional debt limit battles. That's about $95,000 for every adult and child in America.

Debt apologists like to soften the blow by relating the debt of a subject year to the GDP at the time — the gross domestic product, the value of everything produced by the country. In 2000, debt was 55.9% of GDP; for 2022, it had zoomed to 120.2%.

After 2000, both political parties decided the national debt didn't matter, freely borrowing to fund wars, expand federal spending, and stimulate the economy after the crash of 2008 and the pandemic of 2020, all the while compounding deficits by cutting taxes three times. Let’s start with a presidential scorecard. First, an adjustment:

The government's fiscal year begins on October 1st of the preceding year. If a new president was elected that preceding year, the new occupant of the Oval Office inherits his predecessor's budget for most of his first year. So, for example, for almost all of 2009 until his own budget kicked in on October 1st, Barack Obama had to abide by the revenue and spending Bush had enacted for which Obama had no say. In the following we'll make the proper adjustment of assigning the deficit of that carryover year to the preceding president.

 George Bush led off the new century, taking us to war in Iraq and Afghanistan, putting through a costly prescription-drug entitlement for Medicare that affects future presidents, and enacting tax cuts twice — the first president ever to cut taxes in the face of war — trimming the middle brackets by 3% and the top rate from 39.6% to 35%.

In the fall of his final year came the collapse of unregulated mortgage-backed securities, and so-called "exotic" debt and swaps instruments. In the Great Recession that began, Bush had to bail out banking, insurance, and auto industries with the $475 billion Troubled Assets Relief Program (TARP). Handed a catastrophic economy not his doing, Obama had to immediately put through an $800 billion stimulus immediately he took office — a cost we charge to Bush that most think should have been a good deal higher (compare to the pandemic rescue funds).

Using our following year rule, Bush added $6.1 trillion to the national debt, bringing it to $11.9 trillion. The ratio to GDP rose to 52%.

  Barack Obama in 2010 extended the Bush tax cuts for two years, extended federal unemployment insurance, and cut Social Security withholdings as a boost to the still struggling economy, increasing the deficit by $858 billion. Then came the Affordable Care Act (Obamacare), which would add costs for future presidents. He added $8.3 trillion to the national debt, raising it to $20.2 trillion. The ratio to GDP had reached 76%.

  Donald Trump pledged to balance the budget and then pay off the entire national debt. "I think I could do it fairly quickly … I would say over a period of eight years”, an impossibility. Instead in his four years the debt grew from a rounded $20 trillion to $28 trillion, although our method doesn't attribute all to him.

Trump cut taxes, but with no compensating cost-saving measures. The claim was that the tax cuts would pay for themselves through added growth. Instead they helped double the deficit which across two years added close to $2.5 trillion to the debt.

Then the pandemic hit. Small businesses were subsidized to pay idled workers, unemployment insurance was boosted, individuals got $3,200 in direct payments, needed or not, billions went to airlines and other major corporations. The pandemic largess combined to $5.23 trillion overall, $1.9 trillion belonging to Biden. By our reckoning, Trump added $6.3 trillion to the debt, which reached $26.5 trillion and momentarily crossed 100% of GDP.

  Joe Biden has spent lavishly. He began his presidency with $1.9 trillion in further pandemic stimulus, largely viewed as redundant and leading to persistent inflation. He signed a $1 trillion infrastructure bill; the Inflation Reduction Act, which spends close to $400 billion on green energy but with offsets, chiefly a 15% minimum tax for large corporations and funding of the IRS to track down tax avoiders; the $280 billion CHIPS and Science Act to bring home technologies which the U.S. invented; and $400 in student loan cancellation, which is in his budget but awaits a Supreme Court ruling. Biden raised the national debt to $30.9 trillion through fiscal 2022 which ended last September 30th. The deficit has risen to $31.4 trillion since, and with the freeing up of the debt limit will continue its ascent.

Joe Biden isn't done. He has big spending plans as his 2024 budget attests. More of an aspirational exercise with Republicans controlling the House, it shows his priorities. He pushes for universal preschool, wants paid parental leave from work after giving birth, and honors
his pledge to make childcare accessible. A number of tax increases do not do enough to pay for his $6.9 trillion budget plan, leaving even in this hypothetical exercise what would be a $1.8 trillion deficit.

Beyond existing social programs such as food and rent assistance, progressives want free college to equip our youths for life, health insurance for all, child care to free families to work and lead productive lives, elder care to lift the burden off families as the wave of retired baby boomers pass through their late years. Democrats refuse to consider any lessening of Social Security or Medicare benefits. Some such as Bernie Sanders and Elizabeth Warren want benefits expanded. All understandable desires to greatly improve American life, but it's dessert before the spinach. No heed is paid to the reality that we are trapped in a $31.4 trillion deep abyss, and it doesn't occur to us to stop digging.

Republicans are deficit hawks when Democrats are in the White House, but had no qualms about the $12.4 trillion combined deficit rung up by Bush and Trump. After raising the debt limit three times in the Trump years without a second thought, they became greatly troubled about Biden's spending and demanded deep cuts in discretionary items (other than defense, of course). Republican anguish about reducing the nation's debt is only performative. Proof is their adamant refusal to consider tax increases as an essential component of debt reduction. Just cutting costs doesn't do the job.

Worse, as part of the debt ceiling deal, an original Republican demand was to rescind the $80 billion appropriation for the IRS. That was in keeping with the long-term starving of the service to make it impossible to perform the complex audits of high earners shielded by accountants and lawyers. The IRS is the one agency that can make money for the government. The $80 billion is expected to return a few hundred billion dollars in taxes owed but not collected. The IRS believes the "tax gap" is around $600 billion a year. The right-wing desire to strip the IRS of the tools to go after that bonanza leaves their own low-income constituency to pay the taxes, not the rich, not the donor class. That makes the sudden ardor on the right to reduce the debt a pose.

Republicans make that doubly apparent by wanting also to extend Trump's tax cuts. They were passed at the end of 2017 by the "reconciliation" process that requires only a simple majority for passage in the Senate rather than the 60 votes needed to overcome a Democratic filibuster. Reconciliation bills have a limited timespan, though, typically 10 years, with some parts of the 2017 act expiring sooner. Extending the Trump tax cuts would add $3.5 trillion to the deficit, says the Congressional Budget Office (CBO). Clearly, the anti-tax zealots on the right do not take the national debt seriously and are indifferent about making it worse.

The CBO keeps the books on the budget. Its baseline projections assume current laws and policies will continue unchanged, and indeed there is nothing to suggest moves of any sort are afoot to curtail spending or raise revenue. The CBO sees unending annual deficits rising from fiscal 2023's $1.539 trillion to $2.852 trillion in 2033.

As we pile on debt, the fastest rising component is interest. At an average rate that hovers around 3%, the CBO shows interest expense of $663 billion for 2023 soaring to $1.440 trillion in 2033. Let that sink in: well over a trillion dollars every year on interest alone because, if we continue to do nothing, the national debt will rise from today's $31.4 trillion to $52.4 trillion 10 years out.

If you are tempted to say, well, surely we'll do something about the debt before then, then you might ask why isn't $31.4 trillion alarming enough to doing something about the debt now?

The fundamental need is to eliminate our chronic annual deficit, which, as said, is slated by the CBO to be $1.539 trillion this year. The usual answer, only from the left, is to raise taxes on the wealthy.

Let's do a back of the envelope calculation. There are about 129 million households in the U.S., meaning 1,290,000 or so households make up the top 1%. How much would we need to raise their taxes on average to quash the $1.539 trillion 2023 deficit? If our decimal is in the right place, taxes on each of the 1.3 million 1% households would have to be raised by an average of $1.16 million. Is that equitable? "Yes", progressives would probably answer. Others would say that is unfair since all of us have created the deficit by whom we elected to Congress where irresponsible spending occurred. Shouldn’t every one chip in to some degree?

Joe Biden sets a poor example by his insistence that only the wealthiest should pay higher taxes, that he would veto any measure that raised taxes on households earning $400,000 a year or less. That's a whopping big number to exempt from any further taxes if we are ever going to get serious about walking back our annual deficits.

As it stands, the government has given the married-filing-jointly household with a $400,000 income many ways to reduce taxable income: a $27,700 standard deduction — more if itemized — for starters; contributions to 401k plans up to $22,500 for each spouse, if employers have a 401k plan; up to $7,750 into family health savings accounts; as much as $17,000 for each child times each parent contributor to 529 college savings plans. Few families, admittedly, would or could go for the full load, but it makes the point that taxpayers have already been given many tax breaks. So how does Joe Biden justify favoring the up to $400,000 family with still more exemptions?

That rashly chosen threshold leaves a mere 1.8% of American households — those earning above $400,000 — to be considered for higher taxes. A $300,000 dividing line would have made far more sense. It creates a larger pool of 4.3% of all households, which may not seem much, but it adds about 3.2 million households.

A favorite quote is from Ben Stein, a Nixon economics adviser, who said, "If something cannot go on forever, it will stop." That has to be the case for our intractable annual deficit, but one after another of our presidents show no realization of Stein's truism. Biden repeatedly takes credit for in "my first two years in office I’ve lowered the deficit by a record $1.7 trillion". That got three Pinocchios at The Washington Post. It owed to pandemic relief ending, not budgetary spending cuts.

In an interview with Sean Hannity two days before this writing, Trump said that, had it not been for the pandemic, "we were going to pay off debt...we would have paid down the debt, we would've cut the taxes" which, apart from the magic trick of reducing debt while cutting taxes, is a lie. When emergency pandemic funding is set aside, Trump ran up a $1.8 trillion deficit in the year he professed to be paying down the debt.

As for Biden, he shows himself to be entirely accepting of the $1.5 trillion shortfall in the 2023 budget he's proposed as if this is now a permanent normal. And by the way, he's pledged to defend Taiwan in an apocalyptic war with China when Xi Jinping makes his move. Where will that money come from? Will we borrow it from China?

But if we never reduce the $31 trillion debt — just go on borrowing no more than that and paying its interest — the "must" is that we entirely eliminate the yearly deficit that keeps ballooning the debt because this is the "something that cannot go on forever".

Our politicians are betraying the country by not facing up to what must be done, the two sine qua non steps being to raise taxes, and on more than just the richest to start paying our way. That and scaling back entitlements. Just as Biden declared any adjustments to entitlements off limits in the debt ceiling negotiations, so did McCarthy and Republicans insist there be no tax increases. This is what must stop. The longer major change is postponed, the worse the bite when we someday find ourselves confronting national bankruptcy.