After two decades of uninterrupted borrowing, the national debt as a share of the economy is higher than at any time since World War II, a record that will be surpassed in just nine years. Debt is already 97% the size of the economy and will climb to a record 107% by 2031 and 185% by 2052. This assumes no new borrowing occurs and policies set to expire will sunset as scheduled. More borrowing and policy extensions could ultimately push the national debt up to more than twice the size of the economy within three decades. Such a high national debt poses numerous risks and threats that policymakers must start to take seriously.
First and foremost, the recent surge in borrowing has contributed to rapid near-term inflation, which is up 7.7% from one year ago. Over time, our debt will result in higher interest rates, slower economic and income growth, and a heightened risk of a fiscal crisis. We are seeing some of this now. This year alone, the national debt has grown by well over $1 trillion, and the interest rate on 10-year bonds has increased from 1.5% at the end of 2021 to 3.7% today. Meanwhile, the economy contracted by 1.6 and 0.6%, respectively, in the first and second quarters of 2022.
A high national debt requires growing interest payments to service it, which strains the federal budget. The federal government already spends roughly $440 billion on interest payments for the national debt, which is more than what it spends on veterans programs, 2½ times its spending on federal civilian and military retirement, and over 11 times its spending on science, space and technology. Within a decade, interest costs will more than triple, and within three decades, interest payments will be the single largest federal government program. Each dollar spent on interest is a dollar unavailable to spend on reducing taxes or other priorities.
Debt also creates geopolitical challenges and risks and makes responding to emergencies more challenging. Governments and individuals in foreign countries hold about one-third of our national debt, which leaves us with less control over financial markets and fewer tools to leverage our holdings against other countries. Having some of our national debt held abroad means that a share of our national income and growth goes to those living in other countries instead of American households. On the domestic front, high debt will make it harder for us to respond to emergencies. Studies have found that countries that enter crises with high debt face both political and financial constraints to borrowing. As a result, those countries tend to do less to combat the crisis and end up recovering more slowly.
Lastly, high debt spurs further intergenerational imbalances. The federal budget already skews heavily toward adults and seniors, with the federal government spending roughly $6 per older adult for every $1 per child. Rising national debt will burden young and future generations with higher interest payments, slower income growth, and more financial responsibility to shoulder any tax or spending adjustments.
So, what are some steps Congress could take to tackle our debt?
First, Congress needs to fulfill its basic duty of passing a budget. Believe it or not, the $5.9 trillion enterprise that is the United States currently operates without one. In fact, Congress has not passed a real budget since 2015. Comprehensive budget process reform is badly needed to end this chronic pattern of fiscal irresponsibility.
Second, we need to stop digging. At a minimum, Congress should avoid making our debt situation worse. That means not passing unnecessary spending bills that contribute to our debt crisis and strain programs vital to our seniors, veterans and families. Congress should stick to pay-as-you-go practices that promote fiscal responsibility when considering new legislation.
Third, we need to begin a process to address the growth of our mandatory programs. Currently, mandatory programs make up nearly two-thirds of the federal budget. Most of this spending operates on autopilot, meaning its levels do not need to be negotiated and set annually through the appropriations process like the discretionary side of the budget does.
Congress should pursue commonsense reforms that restore solvency to our major entitlement programs like Social Security and Medicare. A way to start would be by a bipartisan commission tasked with reaching a consensus on necessary spending and revenue adjustments to these programs, which would thereafter receive fast-track consideration in Congress.
Last, we need to restore planned discretionary spending caps. Between fiscal years 2012 and 2021, discretionary spending levels were set based on the Budget Control Act of 2011 and subsequently modified through several bipartisan budget acts. Fiscal 2022 marked the first year the caps were not in place, which allowed Congress to go on a spending free-for-all and pass a $1.5 trillion omnibus appropriations bill.
Congress needs to take steps to reverse course and put our national debt on a stable, long-term reduction trajectory. Failure to do so will be catastrophic for our economy, businesses, families, and communities.
• Republican Congressman Randy Feenstra represents Iowa’s 4th Congressional District. Maya MacGuineas is president of the Committee for a Responsible Federal Budget, a Washington-based nonprofit focused on issues of fiscal responsibility.
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