When independent presidential candidate Ross Perot railed against the national debt on his way to winning 19 percent of the popular vote in 1992, the largest inflation-adjusted deficit that America had ever amassed was $629 billion (in fiscal year 2017 dollars). That record-setting tally came in 1945, the last year of World War II. In 2024, during peacetime, our interest payments alone ($718 billion in 2017 dollars) will exceed our entire federal deficit in 1945, even after adjusting for inflation. That’s how bad things have gotten—and they’re getting worse fast.
The nation’s dire fiscal condition is confirmed by newly released Congressional Budget Office (CBO) projections and the White House’s Historical Tables. This year, for the first time in American history, we will spend more on net interest payments on the debt than on our entire discretionary defense budget. By contrast, defense spending outstripped interest payments by more than tenfold in 1962, and threefold as recently as 2012. Now, with just the money we are sending our creditors, we could have covered our entire discretionary defense budget and had $43 billion left over. A decade from now, on our current course, interest payments on the debt will exceed discretionary defense spending by more than half a trillion dollars.
Overall, our 2024 deficit will be the third-highest on record, in both actual and inflation-adjusted dollars. Even after adjusting for inflation, this year’s deficit will be more than double any annual deficit that we accrued while fighting a two-front war against Nazi Germany and Imperial Japan. The CBO now estimates that our 2024 deficit will be nearly $2 trillion, with $145 billion of that total attributed to President Biden’s changes to the federal student-loan program. Thanks in part to the White House’s law- and Constitution-defying gambit, for every $10 in tax revenue that comes in this year, more than $14 in spending will go out.
Per the CBO, the 2024 deficit will add $1.942 trillion in “debt held by the public.” That’s the part of the national debt that really matters (with the rest merely involving transfers from one part of the federal government to another). In recent years, that figure has risen even more than Perot could have imagined.
When Perot ran for president, the public held $3 trillion in federal debt. Sixteen years later, when Joe Biden was running for vice president, that figure had risen to $5.8 trillion. As his own vice president, Kamala Harris, seeks election to the presidency this fall, it will hit $28.2 trillion—$25.2 trillion higher than when Perot sounded the alarm. A decade from now, the CBO projects that the public’s share of the debt will reach $50.7 trillion.
Even after adjusting for inflation (using constant 2017 dollars), the federal debt held by the public will have risen from $5 trillion in 1992, to $6.5 trillion in 2008, to $22.7 trillion in 2024—more than quadrupling the tally from Perot’s day.
Writing about the national debt inevitably involves lots of numbers, and readers’ eyes can glaze over. Consider, then, one truly arresting data point: across the first 220 years under our Constitution, we racked up $6.5 trillion in debt held by the public—after adjusting for inflation—while in the past 16 years, as of this September, we will have racked up an additional $16.2 trillion. Our debt is slated to rise even more from there.
Debt apologists prefer to measure taxes, spending, and debt as a percentage of the gross domestic product, rather than in relation to inflation or population growth. That way, if Americans’ taxes double, but the economy doubles in size as well, these advocates can claim that taxes didn’t rise (at least as a percentage of GDP). They use the same argument in the context of spending and debt. Implicit in their arguments is the assumption that economic growth should be met with a corresponding growth in government and, in the case of debt, with a corresponding growth in the government’s failure to live within its means.
Yet, even using GDP-adjusted metrics, our debt is quickly moving into uncharted territory. “Since 1940 (the first year for which OMB reports such data), net outlays for interest have never exceeded 3.2 percent of GDP,” the CBO writes. “In CBO’s baseline, such outlays exceed that percentage in every year from 2025 to 2034.” The CBO adds that the public’s share of the debt, as a percentage of GDP, “is projected to reach 109 percent in 2028, an amount greater than at any point in the nation’s history,” and will hit “122 percent of GDP at the end of 2034,” which is “two and a half times its average percentage over the past 50 years.” Of course, those past 50 years weren’t exactly an era of fiscal responsibility. Debt held by the public has risen fourteenfold in inflation-adjusted dollars since 1974.
Suffice it to say, our federal government has a major spending problem. This has been evident for decades and has only gotten worse. While the Left likes to blame our deficits on allegedly insufficient taxation, the stats debunk this claim. The federal government in 2021 collected more than three-and-a-half times as much money, in real dollars per capita, as it did at the beginning of the post-World War II period. But spending grew nearly sevenfold.
The Left also likes to blame our deficits on defense spending. But real per capita defense spending, in 2012 dollars, fell from $2,283 in 1962 to $1,953 in 2020. Over that same span, all other real per capita federal spending rose more than eightfold, from $1,930 to $15,646. Defense has gone from constituting more than half of our spending under President John F. Kennedy to less than one-seventh this year under President Joe Biden. Whatever one thinks of our defense budget, it’s clearly not driving the deficit train.
Rather, our deficits are largely being fueled by federal health-care spending. Unlike Social Security, the Great Society health-care programs that President Lyndon Johnson spearheaded and signed into law were not designed to be self-sustaining. Whereas payroll taxes, taxes on benefits, and net interest from its trust fund covered all of Social Security’s costs until 2021, and still cover more than 90 percent of the program (see Table VI.C6), payroll taxes cover only about a third of Medicare’s costs and none of Medicaid’s. (And Medicare’s premiums and taxes on benefits combine to cover less than a fifth of its costs.)
In other words, Johnson and Congress passed these Great Society programs with no idea how to pay for them. Ponder this stat: From 1967 through 2020, Medicare and Medicaid cost a combined $17.8 trillion, while our combined federal deficits over that same span were $17.9 trillion. Our deficit problem is essentially a Medicare and Medicaid problem.
Medicare’s growth over time is instructive. Fifty years ago, for every $10 that went out the door in discretionary defense spending, we spent less than $1 on Medicare. This year, Medicare expenditures will exceed discretionary defense spending by 6 percent. A decade from now, per the CBO, Medicare spending will dwarf discretionary defense outlays by a whopping 52 percent.
Such “mandatory” spending dominates our fiscal picture. This year, nearly 75 percent of federal outlays—consuming 104 percent of our tax revenue—is on autopilot, either in the form of “mandatory” programs or net interest payments on the debt. In other words, we could eliminate our entire defense budget, as well as every other dollar of discretionary spending (that is, outlays approved by Congress through the usual appropriations process), and we’d still have a deficit this year. Politicians nevertheless continue to revel in the fantasy of balancing the budget by “cutting waste, fraud, and abuse.”
Let’s take a closer look at our autopilot spending. Major federal health-care programs (Medicare, Medicaid, Obamacare, and CHIP) will eat up 34 percent of our revenues this year. Social Security will consume 30 percent (most of which comes from payroll taxes dedicated for that purpose), other “mandatory” spending 22 percent, and net interest payments on the debt 18 percent. Together, that’s 104 percent of all revenues—meaning that we have to borrow money just to finance our autopilot spending. All other spending—on defense, highways, national parks, and so on—comes entirely from borrowed money.
For those who think we can deal with our skyrocketing deficits and debt without reforming Medicare and Medicaid, consider this. Just a decade from now, per the CBO, the major federal health-care programs and interest payments on the debt will together eat up 61 percent of all tax revenues. Social Security and other mandatory spending will consume another 47 percent. Before Congress even begins the annual appropriations process or approves a single dollar of funding, we’ll already be running a $587 billion deficit.
Some people ask why our ballooning debt matters. Perhaps the single biggest reason it matters is that the first $892 billion Americans pay in taxes this year will essentially go into the trash—used solely to pay the interest on existing debt, not to buy anything. That’s the first 18 cents of every dollar paid in taxes this year (and 20 cents of every dollar paid in taxes next year), which most Americans would presumably like to have back. A decade from now, such servicing of the debt will increase to $1.7 trillion—nearly double this year’s record-breaking sum.
The White House and its congressional allies are partly culpable for these colossal figures. Their profligate spending both increased the amount of money that we’re borrowing and led to inflation—which prompted the Federal Reserve to raise interest rates, which then made it more expensive to borrow money. The CBO notes that the average interest rate on the debt held by the public rose from 2.2 percent in 2022 to 3.4 percent in 2024. “About two-thirds of the growth in net interest costs from 2024 to 2034,” the CBO writes, “stems from increases in the average interest rate on federal debt, and one-third reflects the larger amount of debt.”
The federal government needs to reform its autopilot spending before it flies not only the plane but also the country into the ground. Solutions such as those seriously considered by both parties in the late 1990s are available, should we choose to act. Doing so will require genuine statesmen to persuade the citizenry that fiscal responsibility is a lot less painful than the alternative—namely, sending huge and ever-increasing portions of Americans’ money to the government’s creditors.
Having celebrated Independence Day last month, perhaps we should heed the words of the primary author of the Declaration of Independence. When describing government actions that lead to “misery” and “suffering,” Thomas Jefferson said that “the forehorse of this frightful team is public debt. Taxation follows that, and in its train wretchedness and oppression.”
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