Washington is finally beginning to acknowledge that the federal government has a serious debt problem. That’s the good news. The bad news is that all the major players remain, to this point, unwilling even to contemplate the uncomfortable reforms that will need to be made to get the country back on a sustainable fiscal trajectory.
On the one hand, President Biden just proposed a plan to “save” Medicare funded entirely by new taxes. Never mind that Medicare’s problem is that it costs too much — its cost is set to increase from 3.1 percent of Gross Domestic Product (GDP) this year to 4.1 percent just over the next decade — President Biden believes the solution is yet more taxes on the rich. Hammer, meet nail.
Unfortunately, his opposition on Capitol Hill isn’t being any more realistic. House Speaker Kevin McCarthy (R-CA) has promised to balance the budget without new tax hikes and while taking Medicare and Social Security cuts “off the table.” How the Speaker proposes to solve our debt problem without doing anything to tackle the root of the problem remains an open question.
Taxpayers need to understand that the debt is a problem now, but a crisis in the future. It’s one we can see coming from a mile away, but which our leaders are not interested in speaking about because any kind of serious solution demands politically unpopular sacrifices.
Right now debt held by the public is at about $24.6 trillion. Numbers that large tend to lose their meaning after a certain point, so for context: the federal government took in about $4.9 trillion last year in total revenue. At that rate, it would take more than five years of the federal government not spending a single cent on anything other than paying off our debt (something that is obviously impossible) to cover our existing debt.
Now, that’s not wonderful, but the real scary numbers are coming down the pipe. The cost of federal entitlement programs like Medicare, Medicaid, and Social Security are set to skyrocket over the next few decades, making a concerning debt problem into a catastrophic one. Just over the next decade, debt held by the public is set to rise to $46.4 trillion — nearly seven times projected revenue that year.
The further out you look, the scarier the problem becomes. Right now the cost of mandatory spending programs like Medicare, Medicaid, and Social Security combined with the cost of just paying interest on the national debt cost taxpayers $4.3 trillion, eating up around 89 percent of total federal revenues. But that ratio is set to grow rapidly. By 2033, that ratio will have hit 100 percent, or over $7 trillion.
At that point, all the other functions of the federal government will be funded through deficit spending. That includes national defense, federal education spending, transportation, other social spending like housing assistance, and just about everything else people think of when they think of the federal government.
Three decades from now, mandatory spending and interest on the debt will cost taxpayers an estimated $18.2 trillion, or 121 percent of total revenue. At that point, the national debt will be an absolutely ridiculous $154.7 trillion, or more than ten times annual revenue. And keep in mind that that’s the best-case scenario, assuming no economic disruptions like pandemics or stock market crashes.
Taxpayers need to understand that if our leaders in Washington refuse to do anything uncomfortable to change our unsustainable spending habits, the fiscal math will eventually force uncomfortable changes upon us. It’s a choice between minor reforms now to bring things under control, or sticking future generations with the bill and forcing them to dig themselves out of an impossible hole.
As much as politicians want to pretend, there’s no option that involves no spending reforms to entitlements, no tax increases on anyone but the ultra-rich, and continued fiscal sustainability. Anyone who tells you that we can solve this problem without doing anything difficult is just refusing to acknowledge the uncomfortable reality.
Andrew Wilford is a senior policy analyst with the National Taxpayers Union Foundation, a nonprofit dedicated to tax and fiscal policy research and education at all levels of government.
The views and opinions expressed in this commentary are those of the author and do not reflect the official position of the Daily Caller.