President Trump Needs to Address the National Debt Now
By Maya MacGuineas, head of the Campaign to Fix the Debt
One topic that President Trump raised extensively on the campaign trail but has not been discussed substantively early in his administration is the growing national debt.
When the President recently addressed a joint session of Congress, he made a passing reference to the accumulation of debt under his predecessor, and just prior to that he tweeted on a very minor and temporary reduction in the debt during his first month in office. His preliminary “skinny budget” noted that the debt is a “crisis” in the introductory text, but it proposed no policies to fix it. In fact, there has been no effort yet to specify how this administration will control high and rising debt.
During the campaign, he rightly warned about the size of the debt repeatedly. Now that he sits in the Oval Office, President Trump must use the bully pulpit to inform the public about the dangerous path we are on and spark a national discussion on how to change course.
Last year, the budget deficit rose for the first time in five years, and the forecast is for trillion-dollar deficits to return within six years. Rising deficits will drive up the debt, which will slow economic growth and make it harder for the country to respond to new challenges.
As he continues to formulate and articulate his agenda, including his forthcoming full budget proposal, here’s why President Trump must address the national debt head on.
The national debt is historically high and rising. The gross national debt is near $20 trillion. The debt held by the public, which does not include what the government owes itself, is currently 77 percent of the economy, which is higher than it has been since just after World War II. In fact, President Trump took office with the highest debt as a share of the economy of any first-term president except for Harry Truman.
And the debt is only expected to rise higher unless action is taken. The nonpartisan Congressional Budget Office forecast that the debt will grow by $10 trillion over the next decade. The debt is projected to surpass the all-time record of 106 percent of the economy by 2035 and continue growing. That is not the kind of legacy we want to leave for future generations.
The main cause of rising debt is no longer a long-term concern. An aging society and rising health care costs will drive most of the growth of the debt. The retirement of the baby boomers was once considered a long-term challenge, but it is now upon us as that group is beginning to leave the workforce. Instead of contributing to vital programs like Social Security and Medicare, they will be drawing from them in increasing numbers.
Spending on Social Security, health care, and interest on the debt will account for over 80 percent of the growth in federal government spending over the next decade. This spending is essentially on autopilot since it will require no annual approval from Congress. The President must show leadership in addressing it.
The debt is sucking up money that is better spent elsewhere. Despite low interest rates currently, we already spend more on interest on the debt than we do on the Departments of Veterans Affairs and Homeland Security combined, as well as more than the Departments of Education, Labor, Housing and Urban Development, and Transportation combined. As interest rates rise, so will interest payments on the debt, which will crowd out investments that can help grow the economy and improve the standard of living for Americans, like education, infrastructure, basic research, and support for low-income families.
In fact, interest on the debt will be the fastest growing part of the budget. Interest is expected to nearly triple in dollar terms and double as a share of the economy over the next decade. If the budget is the true measure of what we as a nation prioritize, then we are strongly signaling that we rank present consumption over investing in the future.
There are real consequences for all Americans if we don’t act. The Congressional Budget Office warns that “high and rising debt would have serious negative consequences for the budget and the nation.” It specifically cites lower wages, reduced flexibility to respond to unexpected challenges like a recession, and increased likelihood of a fiscal crisis.
In addition, higher interest rates caused by higher debt will make home, auto, and credit card loans more expensive, squeezing family pocket books. As we debate the best policies for growing the economy and strengthening the country, having a plan to address the debt must be a significant part of the discussion.
Decisions made in Washington can make things better or worse. The debt is already on an unsustainable path, but the situation could become much more urgent if our leaders act irresponsibly. With issues like health care, tax reform, and infrastructure on the agenda, there are opportunities to either improve the situation or add substantially to the debt.
Now is the right moment for President Trump to start acting on his campaign rhetoric about the national debt. He can show critical leadership by putting the debt on a downward path in his comprehensive budget and by promising to veto any legislation that adds to the debt.
The problem won’t get better unless we start addressing it.
Maya MacGuineas is head of the Campaign to Fix the Debt, a nonpartisan movement to get the national debt under control and put America on a better path http://www.fixthedebt.org/.