The debt: ‘Politics as usual’ fails as usual. Try my bipartisan, patriotic approach. | Opinion
Editor’s note: This is the second of two columns by Jim Martin about the national debt. The other published June 6.
Our national debt is $35 trillion and growing by another trillion every year, twice the growth rate of the economy. It’s unsustainable, and must be stopped cold to avoid a looming financial debacle.
Since President Bill Clinton and Speaker Newt Gingrich balanced the budget 24 years ago, the national debt has grown steadily under Democrats and/or Republicans. Without relief, it will continue soaring until we can’t afford the interest due, which will surpass national defense this year.
Meanwhile in Congress, Democrats favor higher taxes to pay for new spending programs. Republicans want spending cuts to offset more tax cuts. Both excite their core activists and fundraisers, solving nothing.
“Politics as usual” fails as usual. Purely partisan measures can’t get 60 votes in the Senate. Each side rearranges deck chairs while our ship of state plows into stormier deficits.
Here’s one practical solution: a bipartisan compromise with roughly equal tax increases and spending cuts. For the good of the country, each party accepts something it fundamentally opposes. Yes, spreading pain hurts everybody. Doing nothing is worse. For everybody.
On the ledger’s spending side, cuts are limited if vital entitlement programs are exempted. For starters, 21% of all federal spending is obligated for Social Security, 14% for Medicare and 10% for Medicaid, plus 7% for veterans’ and federal retirees’ benefits. Interest on the debt takes 15%.
Sheltering these commitments leaves just one-third of the $6.2 trillion federal budget from which to save $500 billion.
Among discretionary categories, national defense takes 14% of the budget. “Safety net” income subsidies are 7%. That leaves 12% for categories like transportation, energy, education, science, immigration, parks, courts, EPA, OSHA, IRS, FBI and foreign aid. A billion here and a billion there won’t cut it.
Many believe the COVID response overspent or wasted $100 billion or more. If so, that’s a significant start on cutting $500 billion. Social Security could require gradual adjustment of age and income eligibility regardless, because of inadequate future revenue for an aging population. If so, it counts.
Can we match this with a half trillion in tax increases? President Trump’s 2017 inflationary tax cuts came with “sunset” provisions to end in 2025-26. This boosts revenues right away by $400 billion a year, unless Republicans get 60 senators to renew those cuts. They won’t.
The rest requires some combination of (a) up to 2% higher tax bracket for earnings above a million dollars, (b) 1% tax on wealth in excess of a billion, (c) another 2% tax on corporate income, or (d) a higher income base for payroll taxes. To avoid penalizing jobs, try a flat tax instead, and relieve the regulatory burden.
Traditional fiscal conservatives say cut taxes when we can, but raise taxes when we must. President Biden just called for higher levies (to fund more spending), but he can’t get 60 Senate votes either. Typically, his Inflation Reduction Act deficit was: inflationary.
Failure to meet this challenge risks an unprecedented default if we can’t sell enough bonds to cover this surging debt. Businesses and households alike will lose access to loans at predictably steep interest rates.
The Treasury would have to spend down its dwindling reserves and print more money to pay bills. This will launch unparalleled inflation coupled with severe economic distress on many fronts. As gently as words can say, this will be far more dreadful for every American than a bipartisan, patriotic compromise of tax increases with spending cuts.
Here’s why: A national debt far in excess of gross domestic product limits America’s capacity to manage future crises. Consider the risks of another pandemic, war, global economic depression, climate disruption, electric cars with unreliable electricity, oppressive household debt, supply chain failures, flooding immigration, you name it.
We are America. No one but we, the people, can bail us out.
Jim Martin, a Republican, was N.C. governor from 1985-93. He is a regular contributor to our pages.
