by Peterson Foundation
At $21 trillion and rising, the national debt threatens America’s economic future. Here are the top ten reasons why the national debt matters.
- The national debt is a bipartisan priority for Americans. Nearly three-quarters of voters (71 percent) agree that the national debt should be a top-three priority for the country, including 69 percent of Democrats, 68 percent of Independents and 79 percent of Republicans.
- The return of trillion dollar deficits. The Congressional Budget Office (CBO) projects that the budget deficit will rise from $779 billion in 2018 to $1.5 trillion by 2028, resulting in a cumulative deficit of $12.4 trillion over the 10-year period from 2019 to 2028.
- Interest costs are growing rapidly. Interest costs are projected to climb from $315 billion in 2018 to $914 billion by 2028. Over the next decade, interest will total nearly $7 trillion. By 2026, interest will become the third largest category of the budget. With our many important budget priorities, none of us wants interest to become the third largest government “program.”
- Key investments in our future are at a risk. Higher interest costs could crowd out important public investments that can fuel economic growth — priority areas like education, R&D, and infrastructure. In addition, growing federal debt reduces the amount of private capital for investments, which hurts economic growth and wages. A nation saddled with debt will have less to invest in its own future.
- Rising debt means lower incomes. Based on CBO projections from last year, growing debt would reduce the income of a 4-person family, on average, by $16,000 in 30 years. Stagnating wages and growing disparities in income and wealth are very concerning trends. The federal government should not allow budget imbalances to harm American citizens.
- Less flexibility to respond to crises. On our current path, we are at greater risk of a fiscal crisis, and high amounts of debt leave policymakers with much less flexibility to deal with unexpected events. If we face another major recession like that of 2007–2009, it will be more difficult to work our way out.
- Protecting the essential safety net. Our unsustainable fiscal path threatens the safety net and the most vulnerable in our society. If our government does not have sufficient resources, these essential programs, and those who need them most, could be put in jeopardy.
- A solid fiscal foundation leads to economic growth. A solid fiscal outlook provides a foundation for a growing, thriving economy. Putting our nation on a sustainable fiscal path creates a positive environment for growth, opportunity, and prosperity. With a strong fiscal foundation, the nation will have increased access to capital, more resources for private and public investments, improved consumer and business confidence, and a stronger safety net.
- Many solutions exist! The good news is that there are plenty of solutions to choose from. The Peterson Foundation’s Solutions Initiative brought together policy organizations from across the political spectrum to develop long-term fiscal plans. Each of those organizations developed specific proposals that successfully stabilized debt as a share of the economy over the long term.
- The sooner we act, the easier the path. It makes sense to get started soon. According to CBO, we would need annual spending cuts or revenue increases (or both) totaling 1.9 percent of GDP in order to stabilize our debt. If we wait five years, that amount grows by 21 percent. If we wait ten years, it grows by 53 percent. Like any debt problem, the sooner you start to address it, the easier it is to solve.
Addressing our national debt is an essential part of securing America’s economic future. These key fiscal and economic issues should be at the forefront of the policy conversation in Washington, and our leaders should seize the opportunity to pursue sensible reforms that will put our long-term fiscal trajectory on a sustainable path.