WASHINGTON – The national debt surpassed $30 trillion for the first time Tuesday, fueled in part by the coronavirus pandemic and what economists describe as years of unsustainable government spending that could have long-term consequences for every American.
The federal government now owes $23.5 trillion in debt to creditors and another $6.5 trillion to itself. Debt to creditors soared by $1.5 trillion over the last year alone, according to the Peter G. Peterson Foundation, a nonpartisan organization focused on addressing the country’s fiscal challenges.
“It does not make sense as a society to simply spend more than we take in on a permanent and growing basis,” said Michael A. Peterson, the group’s chief executive officer. “What that essentially does is place the burden onto our future and onto the next generation.”
The mounting debt can impact the health and economic security of Americans in numerous ways – hitting their pocketbooks through higher interest rates, for example, or syphoning off government funding needed for other programs.
A $30 trillion debt amounts to about $90,000 per American. Net interest costs on the debt average $1 billion per day or roughly $2,600 per household this year.
And it’s going to get worse.
Over the next three decades, net interest payments on the debt are projected to hit new records – totaling more than $60 trillion and, by 2051, taking up nearly half of all federal revenues and measuring nearly 9% of the gross domestic product, economists warn.
For comparison, interest on the debt has never exceeded 19% of federal revenues or much more than 3% of the GDP.
A $30 trillion debt “should sound the alarm to lawmakers who think we can borrow endlessly without consequence,” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget, a nonpartisan group that promotes fiscal responsibility
“With inflation at a 40-year high and large deficits projected into the future, it is time to start worrying about how to get our fiscal house in order,” MacGuineas said.
Economists attribute much of the spiraling debt to interest payments, growing health care costs and an aging population.
The federal government also has spent $6 trillion over the past two years to help Americans recover from the financial fallout of COVID-19. Tax cuts that Republicans pushed through Congress in 2017, with the promise they would pay for themselves, are projected to add $1 trillion to $2 trillion to the federal debt over a decade, according to government estimates.
The COVID spending under both the Biden and Trump administrations accelerated the nation’s financial problems, “but those trends were existing well before the pandemic,” Peterson said.
Borrowing for the pandemic made sense, MacGuineas said, “but now is the time to change course and gradually return to a fiscally responsible trajectory.”
Rising interest costs are becoming the fastest-growing part of the federal budget. That means more of the taxes taken out of Americans’ paychecks will go “to our past rather than our future,” Peterson said.
A large national debt can make the country less prepared for other disasters, such as the next recession or pandemic, and make it hard to devote money for social programs for the most vulnerable Americans, such as the poor and the elderly.
Over time, the growing debt can push up interest rates for consumers and businesses. The higher rates can ripple through the economy, nudging up rates for mortgages, corporate bonds and other types of consumer and business loans.
We’re very fortunate that interest rates have been so low in recent years because it lowers the burden of all this debt,” Peterson said. “That gives us additional breathing room. But the scary part is it could be quite temporary. As interest costs rise, that debt burden becomes more and more painful.”
“No one can tell you what interest rates are going to be three, five, 10 or 20 years from now,” he said. “Yet we just keep piling on this debt without regard to the risks.”
The nation’s fiscal problems can be fixed, Peterson and MacGuineas said, but that would require tradeoffs on prioritizing spending and taxes. Those tough decisions aren’t likely to happen anytime soon given many lawmakers’ aversion to raising taxes and cutting popular spending programs.
These programs that are supporting Americans, that are supporting our national defense, that are investing in our future, that are protecting the most vulnerable, that are educating our kids – if we feel those are important, they should be paid for,” Peterson said. “It’s immoral for us to continue on this path with such disregard for our kids.”