Andrew L. Yarrow, the author of Forgive Us Our Debts and several other books is a public policy professional, historian, and former New York Times reporter.
Every nation, throughout history, has sometimes spent more than it takes in. Debt is not always bad. The United States went deeply into debt to fight World War II and in America, individuals, families, and businesses go into debt to pay for a college education, buy a house, or invest in research, buildings, or new production facilities. In these cases, debt is taken on to yield a bigger pay-off in the future. If the Western governments were going into debt to make investments in the future that would improve life and strengthen the economy, these might be reasonable choices.
Instead, what has happened during the last 35 years in the United States is different. Year in and year out, with the exception of four years between 1998 and 2001, the United States has routinely run deficits—not to defeat global aggressors or invest in the future, but to pay for programs that grow on autopilot.
America’s gross national debt was $17.6 trillion in early 2014, larger than the entire U.S. economy. Although the nation’s huge debt is universally decried by citizens and politicians alike, few Americans truly understand what is driving its long-term growth. The major source of the problem is that most of the $3.8 trillion in federal spending in fiscal year 2014 is considered “mandatory” — required by law but with Congress unable to vote to appropriate or cut funding for such programs without actually changing the laws currently on the books. Mandatory spending goes primarily for the three big social welfare “entitlement” programs (Social Security, Medicare, and Medicaid) and interest on the debt itself. These expenditures gobble up an ever larger share of public spending, as health care costs soar and the population ages, crowding out spending on other things—and driving up interest payments.
Mandatory spending, which was only about 25 percent of the budget fifty years ago, is now a whopping 63 percent. From the remaining 37 percent, about 19 percent goes to the military and just 18 percent is spent on everything else the government does—from public health, education, and justice, to housing, transportation, international diplomacy, medical research, space exploration, and national lands. By crowding out all other spending, the government will have no money to spend for needed new initiatives or emergencies, from infrastructure investments and education to science and job training. Less domestic investment will reduce long-term economic growth.
The other side of the deficit equation is revenues, and raising taxes is as toxic as cutting Social Security. While Americans complain about taxes and the U.S. tax system is overly complicated and unfair, Americans pay less in taxes than citizens of most other rich countries, even including state, local, and sales taxes. The U.S. tax code is also filled with loopholes, tax breaks and subsidies given to corporations, families, farmers, investors—you name it. These loopholes—so-called “tax expenditures”—can be seen as a disguised form of spending (some have been dubbed “corporate welfare”), and they added up to more than $1 trillion in 2012.
If the government continues on its current glide path of spending much more than it collects in revenues and loses its credit-worthiness to borrow, by 2030 it would be able to pay only for the three big entitlements plus interest on the debt.
Blue-ribbon, bipartisan panels have suggested ways to reduce the nation’s long-term debt, but as Brian Riedl of the Heritage Foundation has said: “The bipartisan consensus is to ignore the problem and let the next generation deal with it.” The biggest reason to worry, therefore, is about what the ever-increasing debt will mean for our children, grandchildren, and future generations. This is both a moral and an economic issue. By not solving the nation’s public debt problems now, we are kicking the can down the road so that Americans in 20 or 30 years—our children and grandchildren—will bear the burden of the debt that we have accumulated. Leaving the problem to future generations means that they will have to pay through higher taxes and reduced government services, lowering their standard of living, and undoubtedly stoking bitterness toward their parents and elders, even deeper anger toward government, and possibly civil unrest.
President Barack Obama has forcefully said that we must not impose such a burden on future generations. But so have Presidents George W. Bush, Bill Clinton, George H.W. Bush, Ronald Reagan, and almost every politician and pointy-headed economist. Nonetheless, the nation remains on a perilous path to economic catastrophe.