Whoever wins 2024 the election will have a thankless task ahead of them: figuring out a way to navigate the extension of a tax cut bill that no one is likely to be willing to throw out the window wholesale while also keeping in mind the looming — and growing — national debt crisis on the horizon. That job is difficult enough for the most detached of policy wonks, but whoever is president this time next year will also need to find a way to get Congress, special interests and the voting public rowing in the same direction. Unfortunately, an understanding of the herculean nature of this responsibility was nowhere on display in this most recent of presidential debates.
Though it has been receiving more attention of late, the general public remains far less worried about the national debt than it should be. The federal debt is set to exceed the entirety of the country’s gross domestic product (GDP) by 2025 (roughly the debt level post World War 2), and the nonpartisan Congressional Budget Office (CBO) was forced in June to increase its estimate of the deficit for 2024 — $400 billion more than it estimated just four months prior.
While that’s worrisome, for now the problems remain abstract. But deficits can quickly lead to a death spiral — with deficits causing interest on the debt, which causes larger deficits, and so on. Three decades from now, the country will be spending more money just paying interest on the debt than on Social Security. Even those figures assume that Congress won’t come up with new ways to grow the debt, even though it has consistently been doing exactly that for over two decades now.
Debt in itself is not a problem, but the consequences of debt can be. Out-of-control debt can lead to reduced investment capital available for more productive private enterprises as it all gets vacuumed up by the federal government. This can also lead to rising interest rates as investors lose confidence in the ability of the federal government to pay back its mounting obligations.
An appreciation of the gravity of the problem was nowhere on display during the first presidential debate. What brief discussion of the national debt that did take place was completely overshadowed by questions about the candidates’ mental fitness — President Biden’s most notable gaffe took place in the midst of a convoluted answer to a question about the debt.
In the midst of this response, Biden took typically little responsibility, suggesting that the cause of the nation’s debt crisis were tax cuts and billionaires not paying enough in taxes. Biden again repeated a long-debunked claim that the wealthy pay a tax rate in the single digits — neglecting to mention that he is defining their tax rates based on total wealth rather than income, something that the actual tax code does not do. In reality, the wealthiest one percent of taxpayers pay over 45 percent of all individual income taxes, nearly double their share of income.
While revenues declined in the wake of the 2017 Tax Cuts and Jobs Act as the vast majority of American taxpayers received tax cuts, government spending has skyrocketed since the last balanced budget in 2001. Pretending that the country can tax its way out of debt problems while continuing to spend, spend, spend, is simply fanciful.
The tax-happy Americans for Tax Fairness estimates that America’s billionaires are worth $5.8 trillion. For argument’s sake, take that number at face value (a great deal of guesswork goes into such estimates). Imagine that it could realistically be translated into an equivalent amount of actual cash (it can’t), and pretend that liquidating that much wealth wouldn’t have enormous economic consequences (it would). Even in that rosiest of scenarios, a government seizure of every last penny of America’s billionaires would eliminate … about 20 percent of the national debt.
This would also do nothing at all to help with future annual deficits — deficits that are only set to increase as demographic pressures make funding government health programs and Social Security more challenging. In fact, it would exacerbate the problem, with the country losing the annual tax revenue from those now impoverished billionaires.
The national debt is a problem that has to be addressed while it is still only massively difficult, not impossible. By the time it really begins to bite, it will be too late.
Andrew Wilford is the Director of the Interstate Commerce Initiative with the National Taxpayers Union Foundation, a nonprofit dedicated to tax 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.
