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The US national debt has blown past $30 trillion, a big number that provides an opportunity to consider the way the country prints and spends money and what it gets in return.
Alarmed at the debt. Republicans are primed to use government spending – and the massive debt – as exhibit A in their case that Democrats are driving the country toward bankruptcy.
Here are just a few examples from Republican lawmakers Wednesday on Twitter:
- “Sadly this debt will be paid by our children and grandchildren,” said Rep. Andy Harris of Maryland.
- “The debt puts an unbelievable burden on future generations of Americans. Congress cannot wait! We must take action now to get America’s fiscal house in order,” said Rep. Lloyd Smucker of Pennsylvania.
- “We must halt this dangerous and out-of-control spending,” said Rep. Doug Lamborn of Colorado.
The pandemic set off a spending spree. It’s true the debt has skyrocketed during the Covid-19 pandemic, when rescue plans passed on a bipartisan basis under President Donald Trump and by Democrats under President Joe Biden sought to keep Americans and businesses afloat.
Both parties are responsible for the debt, and the government has shown its willingness to add to it, repeatedly.
Here’s the outstanding public debt on the first days of the last three administrations, according to the Treasury Department:
- $10.6 trillion when Barack Obama took over on January 20, 2009.
- $19.9 trillion when Trump took over on January 20, 2017.
- $ 27.8 trillion when Biden took over on January 20, 2021.
Bottom line: The government likes to spend, and it’s loath to tax.
Spending more. A war not paid for during the George W. Bush years. A stimulus bill and bank and auto bailouts designed to end the Great Recession during the Obama years were coupled with the effort to make sure every American has health insurance.
Taxing less. Tax cuts during the Trump years were supposed to help businesses grow, but the budget deficit grew too.
Unexpected expenses. The Covid-19 pandemic led the government to spend many trillions of dollars to supplement unemployment when people were out of work, help businesses survive the pandemic and more.
Needed upgrades. Add to all of that the much-needed infrastructure spending lawmakers from both parties came together to pass in 2021.
Unfinished business. Democrats want to add even more to the ledger but have so far failed to muscle through their plans to address climate change and strengthen the social safety net by giving American kids universal pre-K, helping parents afford child care and addressing childhood poverty, among many other efforts.
Sen. Joe Manchin, the West Virginia Democrat, essentially killed his party’s plan for that larger package of spending bills last year, and he cited the national debt and inflation as reasons.
He argued the country should be ready for the next unexpected event.
“What do we do if the pandemic gets worse under the next viral mutation? What do we do if there is a financial crisis like the one that led to the Great Recession? What if we face a terrorist attack or major international conflict? How will America respond to such crises if we needlessly spend trillions of dollars today?” he wrote in The Wall Street Journal in September.
His colleagues disagree that spending on climate change and social programs is needless.
Worry or don’t worry? CNN’s Matt Egan wrote a thorough report on the $30 trillion milestone and noted that experts are split on how much people should worry. The quotes below are from his story.
Worry! ” … the latest debt milestone comes at a delicate time as borrowing costs are expected to rise.”
The borrowing costs will rise because the Federal Reserve, seeking to tamp down inflation, is set to begin raising interest rates.
Worry! “Interest costs alone are projected to surpass $5 trillion over the next 10 years and will amount to nearly half of all federal revenue by 2051, according to the Peter G. Peterson Foundation, an organization focused on raising awareness to the fiscal challenge.”
Don’t worry! ” … the federal government’s interest payments as a percentage of GDP are lower today than in the past. And that gives confidence to many economists that this is not an immediate crisis. In 2021, interest as a percentage of GDP stood at 1.5%, compared with 3% in the early and mid-1990s, according to the St. Louis Federal Reserve Bank.”
Don’t worry! At least not yet. “We’re on an unsustainable path,” (Fed Chair Jerome) Powell told lawmakers last month. “Debt is not at an unsustainable level, but the path is unsustainable – meaning it’s growing faster than the economy, meaningfully faster than the economy. We have to address that over time. We will address it over time. And the better way to do it is soon.”
Worry or don’t worry, continued. Egan also talked to experts who described the US relationship with debt as an addiction. Acting too quickly could be harmful.
Worry! The Peter G. Peterson Foundation has made raising concerns about the national debt its main focus. It points to the imbalance in funding for programs like Medicare and Social Security as evidence the debt needs to be placed under control.
“Leaders in Washington have made imprudent decisions over decades, time and again choosing a favorite new tax cut or spending program above our collective future,” said CEO Michael A. Peterson in a statement.
Don’t worry! Other experts, like the economist Stephanie Kelton, have argued that a government like the one in the United States, which controls its own currency, can sustain large deficits and debt.
She explained the theory to me in 2019, and the arguments hold.
“Remember, their red ink is our black ink,” she said of government spending.
Spending goes out into the economy, and it can help people.
She said at the time that she would rather see companies paying more in taxes and the government spending more to help its citizens.
Paying for the debt. A major complication every few years is the politically fraught dance required for lawmakers to raise the debt ceiling and pay the bills it has already incurred. Each time there’s a standoff over raising the debt limit, it chips away at the idea that the debt is safe.
Most recently, Senate Republicans quietly agreed to a complicated one-time carve-out to the filibuster in order to let Democrats raise the debt limit by $2.5 trillion without any Republican votes. The government can likely continue to borrow money until 2023.
Who owns the debt? The national security element of the debt is another growing issue as Biden squares off against the growing power of China. While the government and domestic entities own most of the debt, a large portion – almost $8 trillion – is owned by foreign countries like China and Japan.
Debtor nation. The US has been in some form of debt through all of its history. The exception? A two-year period beginning in 1835 under President Andrew Jackson.
It is unlikely to be debt-free ever again.