A few months ago, the federal debt we have accumulated over the past decades crossed the $22 trillion mark. That’s a record. And it’s surely not going to be the last.
According to Congressional Budget Office estimates, annual federal deficits over the next decade — the deficit is the annual figure for how much more Congress and the president opt to spend than the government takes in as revenue — are expected to average $1.2 trillion.
Does this matter? Back when I was in Congress, I came away confused practically every time I listened to an economist offer an opinion. Some thought it mattered immensely. Others, not at all.
Here’s a useful way to look at it. Interest on the debt is expected to hit $390 billion this year. We’re paying more in interest on the debt than we spend on our children, and we’re headed toward doing the same with defense. I doubt that fits the priorities of most Americans.
It may even be dangerous. Carrying such huge debt — and spending so much each year to pay off the interest — makes it harder for the government to respond to future challenges and raises the risk of an economic crisis with no gas in the tank left to accelerate out of it. Ultimately government spending has to be paid for. Deficits don’t replace that need, they merely defer it.
But attacking yearly deficits is politically very difficult. They have to be addressed on with both spending cuts and tax increases, but there’s not much appetite in Washington for either.
The first rule for any policy-maker ought to be: Do no harm. This requires a shift in our thinking about spending policies: If something is really important to do, it’s worth paying for and not pushing the cost into the future and on to the backs of our children.
Similarly, we need to get real about taxes. Many politicians believe that tax cuts pay for themselves by boosting economic activity and hence tax revenues. There’s no evidence that this is how things work in the real world, however.
So do we need to panic? No. But we must not take the view that the question is irrelevant.
We need to address the problem now, gradually, rather than be forced into drastic measures by a crisis we all knew was coming, but didn’t have the will to forestall.
Lee Hamilton is a Senior Advisor for the Indiana University Center on Representative Government; a Distinguished Scholar at the IU Hamilton Lugar School of Global and International Studies; and a Professor of Practice at the IU O’Neill School of Public and Environmental Affairs.
He was a member of the U.S. House of Representatives for 34 years.