Columnist Richard Fein: National debt — A threat to our nation’s future

The U.S. Treasury building in Washington, DC, on Saturday, June 3, 2023.

The U.S. Treasury building in Washington, DC, on Saturday, June 3, 2023. BLOOMBERG PHOTO BY NATHAN HOWARD


Published: 04-21-2024 10:34 AM

Modified: 04-22-2024 2:11 PM

This is an update on a column I wrote last year about a threat to our future well-being: the national debt. To summarize, unless the debt crisis is brought under control soon the future will be much more difficult for you, your children, grandchildren and great-grandchildren.

Our national debt is what the federal government owes its creditors ( governments, institutions, individuals, that have lent it money). When the government spends more than than it collects in revenue in a given year, that is called a budget deficit. For 2023, 27% of federal expenditures required borrowing, a deficit of $1.7 trillion. The accumulated sum resulting from years of borrowing to cover annual budget deficits is the national debt.

Our national debt has been growing rapidly. In 2012 the debt was $16 trillion and the annual interest payment was $432 billion. By 2023, the debt reached $33 trillion, on which $875 billion interest needed to be paid. As the national debt increases, creditors will be paid an increasing amount in interest. That will be a trillion dollars annually soon.

Projections for next 10 years indicate that the national debt will increase by another $16 trillion because spending will increase faster than revenue.

There are at least four reasons the annual deficit and national debt threaten our future. First, nobody is required to lend our government money. If creditors lend us money at all, they will do so only at a higher rate of interest. With upward pressure on interest rates, purchases like cars and home will be more expensive.

Second, interest payments mean that other possible uses of federal funds are precluded. For example, funding to deal with another COVID-type pandemic just won’t be there out of collected tax revenue. In fact, existing social welfare programs or national defense would be at risk. Third, money lent to our government is not available for private investments that tend to spur economic growth. Fourth, at some point there will be the risk of serious inflation.

Solutions won’t be easy. One possibility would be to cut expenditures. Doing that would be politically difficult, if not impossible. Four major items account for 68% of the budget : 1)Social Security; 2)Four health insurance programs (Medicare, Medicaid, the Children’s Health Insurance Program, and Affordable Care Act); 3)Defense; and 4) Interest on the national debt. Two other categories account for 15%: Economic security programs; and benefits for veterans and federal retirees.

Some of these expenditures are automatic entitlement programs. Interest on the national debt must be paid to avoid the economic calamity of default. Balancing the federal budget in 2023 would have required eliminating both Medicare ($821 billion) and the federal share of Medicaid ($852 billion). If you wanted to cut the Pentagon rather than Medicare, you would need to cut national defense expenditures to zero.

Another possibility would be to increase revenue through increased taxation. There is some discussion in Congress about raising Social Security taxes. Income tax is a different matter. Income taxes have actually been cut at least three times under recent Republican administrations, and two of those were extended by Democratic administrations.

Our country has occasionally had commissions to address our fiscal problems. The Simpson-Bowles National Commission was created in 2010 by President Barack Obama. It published proposals designed to set the nation on a sustainable fiscal path. None of its recommendations were referred to Congress.

There is legislation in Congress now to establish a commission to identify policies to improve the U.S. medium- and long-term fiscal outlook. As I understand it, increasing income taxes is not included in its tasks. An example of what would be included is stabilizing the debt-to-GDP ratio within a minimum of 10 years. The GDP is the dollar value of the total economic activity in our country ($27 trillion in 2023). At present the national debt is 120% of GDP. It will be difficult to stabilize because our national debt is increasing faster than our economy is growing.

Dealing with the deficit/national debt problem will require both cutting expenditures and raising taxes. These changes can’t be completed in one year, but they can’t take forever, either.

According to a recent Penn Wharton Budget Model report: “Under current policy, the United States has about 20 years for corrective action. After that, no amount of future tax increases or spending cuts could avoid the government defaulting on its debt or debt monetization [that means printing money] producing significant inflation.”

Let’s accept the pain of balancing the budget now to avoid the far worse consequences of an out of control national debt for our economy and fiscal stability in the future.

Richard Fein holds a master’s degree in political science and an MBA in economics. He can be reached at