Reform will be painful, and there’s something for everyone to hate, but it beats the alternative.
Donald Trump and Kamala Harris—whose stints as president and vice president saw a cumulative $12 trillion in deficit-expanding legislation enacted—are competing to see who best can pander to voters with even more expensive spending hikes and tax cuts. Regardless of which one wins the presidency, Panderfest 2024 will likely be followed by annual budget deficits surging toward $4 trillion within a decade.
What would it actually take to cut the budget deficit and stabilize the national debt? The solutions aren’t anything a politician would want to tout on the campaign trail, because they are painful for everyone. A comprehensive plan will involve some changes to our existing entitlement programs and higher taxes for most Americans.
Washington’s fiscal challenge is even worse than commonly understood. Simply continuing current tax and spending policies would push annual budget deficits to nearly $4 trillion a decade from now, or 9 percent of GDP. The national debt held by the public—which has already jumped from 40 percent to 100 percent of GDP since 2008—is projected to soar further to 236 percent of the economy (or $200 trillion) within three decades. Even if the financial markets have the capacity to lend Washington $200 trillion at plausible interest rates (I’m skeptical), the annual interest costs alone would consume between half and three-quarters of all federal taxes by 2054. And this is the rosy budget scenario that assumes no additional spending expansions, tax cuts, natural disasters, wars, or interest rate increases.
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Brian M. Riedl is a senior fellow at the Manhattan Institute. Follow him on Twitter here. Based on a recent report.
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