The National Debt is a Progressive Problem

 The United States is facing a growing debt problem that it will have to confront in the coming decade or face generational turmoil. The Congressional Budget Office estimates that the federal government will accumulate an additional $21.76 trillion in public debt over the next decade. This was predicated upon the ridiculous assumption that the expiration of the Tax Cuts and Jobs Act, which would increase effective tax rates on millions of Americans, would proportionately increase nominal revenues accordingly. The reality is that our deficit is likely to grow by substantially more by 2035 based on that fact.

Furthermore, the CBO predicts that mandatory expenditures, including entitlement and means-tested antipoverty programs, as well as the annual interest payments on the existing national debt, will swell to exceed total revenue by 2030. This means beginning at the start of the next decade our federal government will be borrowing money even before Congress convenes to begin the annual appropriations circus.

Our decadal federal deficit as a percentage of GDP is 5.83%, meaning we are borrowing as a federal government, $0.0583 per $1.00 we produce as a national economy. The fact that our long-term annual deficit as a percentage of GDP exceeds our forecasted annual growth demonstrates that we have officially crossed into a debt spiral. Our debt as a percentage of our total economy will continue to grow each year at aggressively higher rates.

Worse, is that we have to continue attracting trillions of dollars in credit each year to meet our planned obligations. The U.S. will become more reliant upon foreign lenders to meet our annual obligations. As confidence in the United States’ capacity to repay our enormous debt diminishes, the interest rate at which we offer the market will have to increase to stimulate that demand, only compounding the problem.

Eventually, we will be faced with three painful choices. (1) Dramatically increase taxes, and not just on the “rich”, but across the board in the fashion of Europe. Even this does not offer a guarantee of success. We have had incredibly high tax rates in the past and not produced an equally high increase in revenue as a percentage of GDP. (2) We could drastically scale back these mandatory programs. However, the magnitude of the cuts dictated at that time would cause genuine suffering for millions of Americans. (3) We could print our way out of the problem, but the consequence would be an unprecedented escalation in the inflation that has devastated the wellbeing of the American people. None of these options are viable, and therefore our current trajectory is unsustainable.

Humans have a natural inclination, when faced with a dire situation, to point fingers and cast judgment. However, our national debt is a bipartisan problem, insofar as our political leaders have subverted themselves to political pressures rather than embracing the statesmen role of correcting the course in the midst of fiery public opinion. It is important though to examine the cause of a problem to produce an adequate solution. When we examine the root of our current debt crisis, we can clearly see that this is not a bipartisan induced crisis. This is clearly the fruits of progressive policy.

From 1980 to 2024, the United States added $32.22 trillion in gross public debt. Approximately 46% of that debt came during Republican administrations. However, it is important to look under the hood and examine the root causes of our national debt. The common assumption is that Republicans have driven our debt through a combination of tax cuts for the “rich” and heightened defense budgets. Is this perception valid?

We can examine three different tax cuts initiated by Republican presidents, Ronald Reagan, George W. Bush, and Donald Trump.

Ronald Reagan slashed federal taxes across the board in 1981, and although he would go on to undo approximately one-third of his initial tax cuts, he then proceed to overhaul the entire tax code in 1986, bringing the top marginal rate from 70% in 1980 to 28% by 1989. We should expect that not only did revenue crash, but it should also have stayed depressed, adjusting for inflation, over the horizon.

Except the opposite was true. Federal revenue, adjusting for inflation, rose by 19% from 1981 to 1989. Revenue as a percentage of GDP averaged 17.22% during the Reagan budgets, compared to the 16.75% average of the preceding two decades. By 1989, revenue as a percentage of GDP actually increased after the 1981-1982 recession reaching 17.57% in 1989. This was despite the fact that real GDP grew annually during that period by 4.64%, compared to 3.74% average growth over the 1961-1980 period. Revenue was rising against an even faster growing GDP.

The case is similar with the Bush and Trump tax cuts from 2001, 2003, and 2017. President Bush signed his tax provisions in the midst of the Dot-Com Bubble Crash and the subsequent recession. They were originally designed to be partially phased in, and were only accelerated with the 2003 law. Nevertheless, we find that revenue, adjusting for inflation, still grew by nearly 9.1% from 2001 to 2007 (prior to the Great Recession). Likewise, President Donald Trump implemented his tax provisions in 2017. Inflation adjusted tax receipts are 19.4% higher in 2024 than in 2017. Even revenue as a percentage of GDP is almost identical between the two years.

We can clearly see that these three tax cuts were not drivers of our national debt. Revenue did decline in 1981-1982 and from 2001 to 2003, but that was a factor of the steep recessions experienced during those periods, not the tax cuts. Hence, when the business cycle ran its course and the economy recovered, we were collecting more inflation adjusted revenue than before.

If it wasn’t tax cuts that drove our national debt, it must be those dastardly defense buildups Republicans covet. Since 1980, total defense spending has increased, adjusting for inflation, by 65.55%, or a compounded rate of 1.15% per year. It is true that on net, examining where the DoD budget was at the start and conclusion of each term, 100% of the increase in defense spending, adjusting for inflation, came during Republican Administrations. In constant 2017 dollars, President Reagan and Bush Sr. increased spending from $404.7 billion in 1980 to $538.4 billion in 1992. Clinton then reduced that to $453.2 billion by 2000. President George W. Bush bolstered that to $657.5 billion by 2008, and while Barack Obama initial surged the spending during his first term, he ultimately left it less than he started at $594.0 billion in 2016. President Trump further increased it to $675.8 billion by 2020, while Biden largely left it neutral at $670.0 billion by 2024.

This is irrelevant, because while Republicans were responsible for a 65.55% growth in Defense spending, or 1.15% per year compounded rate, revenue, adjusting for inflation, during the same period grew at a compounded rate of 2.24% per year. Over the long-run, the Republican Party’s propensity to increase defense spending has not been a driving factor in the explosion of the national debt. This is why defense spending as a percent of GDP has actually fallen from 4.7% in 1980 to 2.9% in 2024.

If it’s not the Republican tax cuts, or the Republican defense buildups, it must be their irresponsible management of the congressional budget, or discretionary expenditures. We find that this is actually not accurate either. From 1964 (when the federal budget really began to explode) to 2019, the discretionary budget grew by an inflation adjusted annual rate of 1.54% during Democratic Administrations and 1.30% during Republican Administrations. If we excluded the “compassionate conservatism” of George W. Bush, then the growth under the Republican presidencies falls to a meager 0.29% per year. If we exclude the six years when Republicans controlled the Congress during Bill Clinton’s presidency, the growth rate under Democrats rises to 4.37%.

Republican presidents, even including old W., are historically more responsible with the public purse than Democratic presidents. Here again we find that this examination is completely pointless. Discretionary spending over the entire period, Republican or Democrat, grew at an average inflation adjusted rate of 1.37% per year, which is half the growth in revenue (2.61%). The irony is that Congress is historically responsible with the discretionary budget. So, what is the source of our growing debt? Mandatory expenditures.

At the same time that revenue grew at 2.61% per year, mandatory programs grew collectively at a rate of 4.70% per year. This is why mandatory expenses as a percent of total spending grew from 27.5% in 1964 to 73.6% in 2024. More than 79% of these expenses are just relating to education, healthcare, antipoverty assistance, and Social Security. An additional 18% is the net interest on our existing public obligations. Aside from the introduction of Medicare Part D and Medicare Advantage under the Bush Administration, every one of these mandatory programs that comprise 79% of our total mandatory spending and 58% of all federal spending, were established by Democratic Administrations, steered by progressive ideology. Our national debt crisis is a progressive creation.

The tragic irony is that most of these programs have historically been ineffective at achieving their original aim, or are not as efficient as alternatives. However, progressives have spent ninety years making it taboo to even discuss minor reforms to these various policies. This is why there is such an outcry by the Left and the mainstream media that the Republican Congress is seeking to slightly alter Medicaid and SNAP by adding citizenship requirements and a mediocre eighty-hour work requirement, for the whole month, for only able-bodied adults, who either do not have children or have high school aged children.

Unless the United States is willing to come to reality and have an adult conversation about the trajectory of our mandatory spending, we will sentence our posterior to painful and entirely avoidable consequences. We do not even have to abandon the desire to lift Americans up or plan for the golden years. We just simply cannot maintain the existing approach.