$20 Trillion in National Debt Is a Big Deal
You have probably heard by now that the gross national debt has hit the $20 trillion mark. Truth be told, this is not the most important number to be concerned with. But it is still worthy of attention if it gets us talking about the numbers that do matter: the debt held by the public as a share of the economy. And there, too, we are at a historic high.
In fact, at 77 percent of the economy, the debt has not been higher since the immediate aftermath of World War II. When Donald Trump took office, he gained the dubious distinction of entering the White House with the highest debt as a share of the economy of any new president besides Harry Truman.
Even more troubling than where the debt currently stands is where it is heading. The nonpartisan Congressional Budget Office projects that the debt will surpass the all-time high of 106 percent of the economy by 2035 — and keep rising indefinitely.
At least Truman had the benefit of a booming post-war economy as the United States led the rebuilding of Europe and a new economic era. The current situation is much different. Predictions of huge growth from some quarters aside, our aging workforce is, unfortunately, expected to limit growth significantly.
What does all this mean for the Trump administration and Congress as they tackle major items such as tax reform and infrastructure? These issues must be handled in a way that does not add to the already unsustainable debt situation.
Pursuing an economic growth strategy is essential. But growth alone will not fix the debt. Furthermore, growth will not be sustainable over the long run if we do not address the debt.
High and rising debt will slow the growth of the economy and wages. It will also reduce investment in areas such as education, infrastructure, supports for low-income families, and funding for basic research — all which can help grow the economy and improve our standard of living. Finally, rising debt will make it harder to respond to future challenges, like another economic recession. A pro-growth agenda will only be effective if it is paired with a fix-the-debt strategy.
This will require confronting the factors driving the debt going forward: an aging population; rising health-care costs; growing interest payments on the debt; and insufficient revenue. The nonpartisan Congressional Budget Office projects that over 80 percent of government spending growth over the next decade will come from Social Security, health care, and interest on the debt. That spending is effectively on autopilot as it is not subject to the annual appropriations process.
Yes, $20 trillion is just one number. But the story behind that number matters. The fact is the national debt is large and growing no matter how you measure it, and that will have consequences for all of us. Now is the time to make the difficult decisions and find the right solutions to get the national debt under control and put the country on the right economic track.
Maya MacGuineas is head of the Campaign to Fix the Debt, a nonpartisan movement to put America on a better fiscal and economic path.