IOU: America's Trillion Dollar Debt Trap

Brinkmanship at the Nation’s Expense

Imagine you’re about to lose your home to foreclosure. Panic would set in ~ big time! But then, what if you were told you could push that reckoning far into the future? Even if it meant your kids or grandkids would eventually be stuck with the bill, wouldn’t you at least be tempted to take that option? This is essentially the approach our feckless members of Congress take with the national debt. But unlike a personal foreclosure, the consequences affect the entire country…every family and every business. And here’s the kicker: the folks making these decisions aren’t the ones who have to face the music. Instead, they run up the tab, and the nation is left holding the bill.

What is the national debt?

Simply put, the national debt is the total amount of money that the U.S. government has borrowed over time to cover the shortfall between its expenditures and revenues. This borrowing primarily happens through issuing securities like Treasury bonds, bills, and notes. The debt is essentially a cumulative total of all past deficits.

The debt is classified into two categories: public debt, held by external investors, and intragovernmental holdings, which are funds borrowed from government accounts, like Social Security.

So, you ask: What’s the difference between the debt and a deficit?

Here’s where people often get confused. The deficit and the debt are not the same thing. Think of the deficit as your credit card bill ~ the amount you’re short on this month. The national debt, on the other hand, is the running total of everything you’ve ever borrowed and haven’t paid back.

In fiscal terms, the deficit happens when the government spends more in a year than it collects in revenue. The deficit is driven by rising interest costs, increased healthcare and Social Security spending, defense, tax cuts, and economic stimulus programs.

To cover the shortfall, the government borrows money ~ adding to the national debt, which has now ballooned to nearly $35 trillion. According to the Congressional Budget Office, if current policies remain unchanged, the debt could soar to $50 trillion by 2033.

The National debt, Congressional gridlock, and the looming threat of a government shutdown

Bulletin: The national debt is America’s perennial crisis-in-the-making…a ticking time bomb, and we’re running out of time.

The problem isn’t just fiscal mismanagement. It’s a product of deep dysfunction in Washington.

Since 1976, there have been 21 government shutdowns. The most recent, from December 2018 to January 2019, lasted 35 days ~ costing $18 billion in federal spending and knocking $11 billion off the GDP. Essential services were disrupted, and public confidence in the government’s ability to manage its finances took a hit.

And here we go again! As usual, political gridlock has reared its ugly head. With the fiscal deadline for 2024-2025 fast approaching, Congress needs to act ~ but, the struggle to pass the annual budget and appropriation bills highlights sharp partisan divides.

Republicans argue that excessive federal spending, especially on Biden administration programs, fuels the growing debt and advocate for spending cuts.

The latest attempts to pass a continuing resolution have faltered, and as Speaker Mike Johnson scrambles for a solution, former President Trump has urged Republicans to reject any deal without “election security” guarantees.

Meanwhile, Democrats attribute reduced government revenue to GOP-backed tax cuts and favor increasing revenue through higher taxes on corporations and the wealthy.

This mess has only compounded the national debt problem. It reflects both the dysfunction in U.S. fiscal policy and the maddening failure of governance. The inability to reach a consensus on managing the budget and addressing the national debt underscore the challenges of governance in a polarized political environment. The lack of a long-term fiscal plan threatens economic stability and undermines public confidence in the government's financial management.

Nevertheless ~ despite the costs ~ every year, temporary budget measures and short-term fixes pile more debt onto the American taxpayer’s shoulders. When a shutdown occurs, it not only disrupts government operations and vital services, it leads to higher borrowing costs and increases the debt burden.

Why is the growth of the national debt dangerous?

There are five main reasons why the growing national debt is a serious…even existential…threat to national security:

First, as the debt grows, so do the interest payments. These payments consume a significant portion of the federal budget, reducing the funds available for other essential services like education, healthcare, and infrastructure. Higher interest obligations can lead to higher taxes or reduced public services.

Second, government borrowing can drive up interest rates, making it more expensive for businesses and individuals to borrow money. "Crowding out" can stifle private investment, slow economic growth, and reduce job creation.

Third, high levels of debt limit the government's ability to respond to economic crises or invest in long-term projects. When a significant portion of the budget is dedicated to debt service, there is less room to maneuver during recessions or emergencies.

Fourth, if the government resorts to printing more money to pay off debt, it can lead to inflation. While inflation has cooled down (the current annual inflation rate is 2.5%, the lowest since February 2021), hyperinflation can erode purchasing power and destabilize the economy.

Fifth, a large portion of U.S. debt is held by foreign entities. This dependency can be pretty risky if geopolitical tensions rise, because it may give foreign creditors leverage over U.S. economic policies.

Strategies to reduce the national debt

Reducing the national debt is essential, but it’s also a complex challenge. A range of strategies has been proposed to bring the debt under control, though each comes with its own set of obstacles.

One often-discussed option is the enactment of a Balanced Budget Amendment, which would constitutionally require the federal government to balance the budget. This could prevent further debt accumulation, but it wouldn’t address the existing debt. Moreover, such an amendment could limit the government’s ability to respond to emergencies or recessions, where deficit spending can be a crucial economic tool.

Spending cuts are another frequently mentioned strategy. Reducing discretionary spending ~ on defense, subsidies, and other non-essential programs ~ could lower the deficit. However, cuts to programs that people rely on are politically difficult to enact and could harm critical services and economic growth if not carefully targeted.

Entitlement reform is another necessary but politically sensitive solution. Programs like Social Security, Medicare, and Medicaid account for a large portion of federal spending. Gradually raising the retirement age, adjusting benefits, or increasing payroll taxes could reduce the financial strain on these programs. Yet, any changes to entitlement programs are sure to face fierce opposition, especially from older Americans who depend on these benefits.

Tax reform offers another path forward. Simplifying the tax code, closing loopholes, and ensuring that corporations and high-income individuals pay their fair share could boost government revenue without stifling growth. However, tax reform is notoriously contentious, with different sides deeply divided over what constitutes “fair taxation.”

Promoting economic growth is another potential solution. When the economy grows, tax revenues increase without raising rates, and the debt burden becomes more manageable. Investments in infrastructure, education, and research could spur long-term growth, but these investments often require upfront spending, which can temporarily increase the debt.

Debt restructuring might also offer some relief. Negotiating with creditors to extend the maturity of the debt or reduce interest rates could make it more manageable in the short term. However, restructuring doesn’t reduce the principal debt, and it may harm the nation’s credit rating.

Finally, public-private partnerships could help finance key projects, such as infrastructure, without adding to the national debt. But such partnerships often come with complexities, including shared financial risks, and their effectiveness depends on careful execution.

Kicking the Can Down the Road

As daunting as the national debt crisis may be, perhaps the most frustrating aspect is the glaring lack of political will to confront it. Solutions, as noted above, exist ~ some tough, others more nuanced ~ but the real obstacle lies in the political landscape.

Both parties often warn about the dangers of debt during campaigns, yet in office, they kick the proverbial can down the road. Why? Because the consequences won’t be felt immediately, but years ~ perhaps decades ~ from now. By then, today’s leaders will be long gone, leaving future generations to deal with the fallout.

Polarization has made consensus on fiscal issues nearly impossible. Discussions on spending cuts, tax reform, or entitlement adjustments quickly descend into partisan finger-pointing. The right blames "big government," the left calls for "fairer taxation," but neither side compromises. Instead, they settle for short-term fixes that please their political bases while ignoring the root problem.

As long as the political system remains fractured, meaningful solutions to the national debt will stay out of reach. Without the courage to cooperate, compromise, and make tough, unpopular decisions, the debt will keep growing, interest payments will balloon, and the U.S. government will edge toward financial instability.

Ultimately, the national debt is a crisis everyone sees but no one wants to claim.

The real question is: how much farther can we kick the can before we run out of road?