The federal debt passed $40 trillion last week, setting yet another record. As humans, we’re not equipped to be able to comprehend how much a trillion of anything is, much less 40 of them. To put it into context, if you include the Oort Cloud, our solar system is only 10 trillion miles across. If you were to stack $40 trillion worth of $100 bills, it would circumnavigate the globe. If America had to pay off its debt tomorrow, each of us would owe almost a quarter of a million dollars.
We don’t need to use light years or miles of money to know that our national debt is unsustainable and out of control, but we can use the measurements that economists use. One of those yardsticks is debt to GDP. In 2020, at the height of the pandemic, the federal debt was 126% of our gross domestic product. If current trends continue, the Congressional Budget Office, the nonpartisan legislative fiscal bureau that Congress uses to project costs of legislation, predicts that our debt will be 175% of our GDP in the next 30 years.
Another measurement economists use is publicly held debt. Not all of our federal debt is sold to the public in the form of treasury bonds. When looking at the debt, economists tend to focus on the portion of the debt that is publicly held, this excludes the debt held in the Social Security trust funds. Of the $40 trillion, $32 trillion is currently held by the public, which is 98% of the GDP.
Both of those numbers are deeply troubling. Even those economists who are more comfortable with government debt are starting to ring the alarm bells. The Wall Street Journal, America’s economic paper of record, recently said that the nation is on “an unsustainable fiscal trajectory.”
So, who’s to blame? Well, the easy target is our elected officials, and just because it’s easy to blame politicians, doesn’t mean it’s wrong to do so. They are most definitely to blame for the current state of things. When Republicans rose to power two years ago, they created DOGE, the Department of Government Efficiency, headed by Elon Musk. DOGE promised to address the national debt by cutting waste and investigating fraud. But the reality, despite the rhetoric we often get from our elected officials, is that waste and fraud only account for a tiny sliver of our debt. DOGE promised to cut federal spending by $1 trillion, a drop in the bucket of our actual debt, but wasn’t even able to do that. Even the most ardent supporter of DOGE’s work can only point to about $200 billion in savings, and even that is probably a stretch.
Many who oppose President Trump point to his war with Iran as a driver of the debt, but defense is only 13% of the federal budget. We could end the war tomorrow, cut the entire Department of Defense and not make much of a difference in the deficit, although we would then find ourselves unarmed and defenseless.
What’s ironic is that Republicans consistently brand themselves as the party of “fiscal responsibility,” yet they control both houses of Congress and the White House as our deficit continues to skyrocket. But often when Republicans talk about cutting spending, they're really talking about cutting programs they don't like, meanwhile they have no problem borrowing and spending for their own pet projects. At least the Democrats are honest about their willingness to tax and spend. The reality is that neither party has any desire to take the kinds of measures that would actually have to be put into place to address and make any meaningful progress on the debt.
Half of all federal spending goes towards Medicare, Medicaid, Social Security, and other transfer payments. The costs of those programs continue to rise even as revenues drop due to tax cuts. You don’t need a degree in economics to know that when you spend more and take in less, your debt grows. Meanwhile, it puts those programs in peril. The Committee for a Responsible Federal Budget projects that Social Security will become insolvent during the terms of the senators who get elected this November. That’s how close it is.
Sometimes people call budgets moral documents when they want to justify taxing more or spending more on programs. That may be true, but it’s also immoral to burden our children and their children with debt that they cannot get out from under. The problem is that Medicare, Medicaid, and Social Security are political third rails and nobody who values their job in Washington wants to touch them, but without entitlement reforms, we will never be able to curb the current trends and we will continue down an unsustainable path.