The National Debt still matters.

by Rod Williams - When President Obama was president, conservatives wrote news articles and scholarly position papers and produced memes and videos explaining the dangers of a growing national debt and it was an important Republican talking point. Democrats had no concern about the national debt. Now, things have changed. Just like the Republicans were the party concerned about the constitutional separation of powers and Democrats didn't; now, Democrats do and Republicans don't. Same with the national debt. Now Democrats care, and Republicans don't.

Answers about what to do about the national debt are not simple. The tax cuts may have contributed to the national debt, but that does not mean the tax cuts were bad. Tax cuts also spur economic growth and bring in more government revenue. Of course, economic growth is not just about bringing in more revenue to the government. Economic growth lifts people out of poverty and keeps people from losing their jobs and their homes and their savings. Increasing taxes may actually cause the National Debt to increase because higher taxes slow economic growth. We can't tax ourselves into solvency. If at the new tax rates, growth could be maintained at about 4% it is believed that government revenue would increase sufficiently to start bringing down the debt.

For more on the relationship to economic growth and the National Debt see,  CBO Shows Faster Growth Is Important for Fixing the Debt.  

Despite Republicans no longer caring about the National Debt it is still important. This article from the Peter G. Peterson Foundation explains why.

Top 10 Reasons Why the National Debt Matters

At $22 trillion and rising, the national debt threatens America’s economic future. Here are the top ten reasons why the national debt matters.

1. The national debt is a bipartisan priority for Americans.
   
   Nearly three-quarters of voters (74 percent) agree that the managing the national debt should be a top-three priority for the President and Congress, including 71 percent of Democrats, 76 percent of independents, and 73 percent of Republicans.
2. The return of trillion dollar deficits.
   
   The Congressional Budget Office (CBO) projects that the budget deficit will rise from $897 billion in 2019 to $1.4 trillion by 2029, resulting in a cumulative deficit of $11.6 trillion over the 10-year period from 2020 to 2029.
3. Interest costs are growing rapidly.
   
   Interest costs are projected to climb from $383 billion in 2019 to $928 billion by 2029. Over the next decade, interest will total nearly $7 trillion. We will soon be spending more on net interest costs than we do in other essential areas such as Medicaid and Defense.
4. Key investments in our future are at a risk.
   
   Higher interest costs could crowd out important public investments that can fuel economic growth — priority areas like education, R&;D, and infrastructure. In addition, growing federal debt reduces the amount of private capital for investments, which hurts economic growth and wages. A nation saddled with debt will have less to invest in its own future.
5. Rising debt means lower incomes.
   
   Based on CBO projections from last year, growing debt would reduce the income of a 4-person family, on average, by $16,000 in 30 years. Stagnating wages and growing disparities in income and wealth are very concerning trends. The federal government should not allow budget imbalances to harm American citizens.
6. Less flexibility to respond to crises.
   
   On our current path, we are at greater risk of a fiscal crisis, and high amounts of debt leave policymakers with much less flexibility to deal with unexpected events. If we face another major recession like that of 2007–2009, it will be more difficult to work our way out.
7. Protecting the essential safety net.
   
   Our unsustainable fiscal path threatens the safety net and the most vulnerable in our society. If our government does not have sufficient resources, these essential programs, and those who need them most, could be put in jeopardy.
8. A solid fiscal foundation leads to economic growth.
   
   A solid fiscal outlook provides a foundation for a growing, thriving economy. Putting our nation on a sustainable fiscal path creates a positive environment for growth, opportunity, and prosperity. With a strong fiscal foundation, the nation will have increased access to capital, more resources for private and public investments, improved consumer and business confidence, and a stronger safety net.
9. Many solutions exist!
   
   The good news is that there are plenty of solutions to choose from. The Peterson Foundation’s Solutions Initiative brought together policy organizations from across the political spectrum to develop long-term fiscal plans. Each of those organizations developed specific proposals that successfully stabilized debt as a share of the economy over the long term.
10. The sooner we act, the easier the path.
    
    It makes sense to get started soon. According to CBO, we would need annual spending cuts or revenue increases (or both) totaling 1.9 percent of GDP in order to stabilize our debt. If we wait five years, that amount grows by 21 percent. If we wait ten years, it grows by 53 percent. Like any debt problem, the sooner you start to address it, the easier it is to solve.

Addressing our national debt is an essential part of securing America’s economic future. These key fiscal and economic issues should be at the forefront of the policy conversation in Washington, and our leaders should seize the opportunity to pursue sensible reforms that will put our long-term fiscal trajectory on a sustainable path.

Top Stories