There is a massive national debt but do we really care about it?
That’s a relevant question, but a hard one to answer definitively because the answer has to be yes and no.
We say we do care. Our elected leaders talk about it constantly, and in polls of national issues, it is invariably one of our top five. But, are we serious enough to hold our elected candidates to a meaningful standard of fiscal integrity? No, we aren’t.
During the last presidential campaign, candidate Trump promised that he would eliminate the nation’s debt in eight years. But so far, he has robustly steered in the opposite direction. His budgets have added $9.1 trillion to the national debt and if unchanged, will ultimately increase the total debt to $29 trillion, according to Congressional Budget Office projections.
When elected, candidate Trump promised two strategies to reduce the debt. He promised to grow the economy at 6 percent annually to increase tax revenues. But once in office, he lowered his growth estimate to 3.5 percent.
The 3 percent level is a healthy growth rate. When growth is more than that, it creates inflation. Too much money chases a plethora of speculative business projects. Irrational exuberance grips investors. They create a boom-bust cycle that ends in a recession.
But most recently, the president’s fiscal year 2020 budget lowered annual growth rates to between 2.4 percent and 2.9 percent. Remember, he had promised to achieve 4 percent growth — with tax cuts.
In his first 100 days, Trump released the outline of what would become the Tax Cuts and Jobs Act of 2018. The big negative to increasing tax revenues came in the form of a cut to the corporate tax rate from 35 percent to 21 percent beginning immediately after passage of the act. The top individual income tax rate also dropped to 37 percent. The corporate cuts are permanent, while the individual changes expire at the end of 2025. In a monument to fiscal irresponsibility, our tax-cut obsession eclipsed entirely any concern for the national debt.
According to the CBO, the new tax cuts will never stimulate the economy enough to make up for lost tax revenue. Tax cuts worked in the Reagan administration when the highest tax rate was 90 percent.
Trump’s second strategy was to “eliminate waste and redundancy in federal spending.” He preached cost-consciousness in his campaign. He was right that there is waste in federal spending. However, the problem isn’t finding it. Both Presidents Bush and Obama did that. The problem is cutting it. Each major spending program has a constituency that lobbies Congress very, very effectively. Eliminating benefits loses voters and contributors. Congress will agree to cut spending in someone else’s district, but not in their own. And the problem is, they all feel that way. There have been no cuts in government waste to come close to reducing, in any meaningful way, the national debt.
Any president must cut into the biggest programs to make an impact on the debt. More than two-thirds of government spending goes to mandatory obligations made by previous acts of Congress. To lower the debt, military spending must be trimmed. Yet in terms of pure expenditure, the current president is holding nothing back, in spite of the fact that our defense spending is more than China, Russia, the United Kingdom, France, Germany and India combined. And please note that all but two of those countries are allies.
After defense spending, only $676 billion remains to pay for everything else. You can’t reduce the debt without major cuts to defense and mandated benefit programs. Cutting waste simply will not do the job.
On Feb. 11 of this year, the U.S. debt exceeded $22 trillion. The CBO projects that interest alone will double in four years. Interest costs are projected to climb from $382 billion in 2019 to $921 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 Defense and Medicare.
And, this year it is projected that interest alone will exceed what we spend on all national programs that serve children. But does that matter — does anyone care?
In spite of the lip service we pay to fiscal responsibility, as long as the president boasts that he has just passed the biggest tax cut in history and as long as that line is greeted with vigorous cheering and desultory inaction by Congress, it is proof that the answer is “no,” we simply don’t care.
Don Tortorice is a former attorney and professor at the Law School of the College of William and Mary.