A few weeks ago, I was listening to a podcast about the political turmoil in France when they mentioned France’s major problems with debt. So, I looked up their debt-to-GDP ratio. The answer? 113%. That’s a large number, but the debt-to-GDP ratio of the United States is 123%, which is even larger.
Despite this, we don’t seem to be even remotely bothered by this. The Republican Party, which used to be the party of “fiscal responsibility”, has plans for the incoming Trump administration that would explode the deficit. Trump’s plans would increase the national debt by $7.5 trillion. Admittedly, Kamala Harris’s plans would also have increased the debt by over half ($3.5 trillion).
All this came to a head this week after President-Elect Trump and his emotional support billionaire Elon Musk decided to unilaterally shut down the spending deal negotiated between Speaker Mike Johnson and Democrats, as Trump wanted the debt ceiling abolished. So, Democrats, angry about Republicans abandoning the said deal, sank the spending deal endorsed by Trump and Musk with help from Republican budget hawks. Luckily, Democrats and Republicans agreed and passed a spending bill to keep the government open.
While I am happy that we were able to avoid a government shutdown that would paralyze our economy, I find myself once again frustrated by a country that seems to want to ignore our debt problem.
Of course, this is not to say that cutting the debt is easy, especially with a public that has gotten used to constant deficit spending. It is also true that neither Democrats nor Republicans have accepted what it will take to truly balance our budget. Many Democrats prefer to ignore the problem altogether as if it isn’t a problem. Furthermore, Democrats are likely to oppose any measure that would meaningfully decrease our spending (unless it is defense spending). Meanwhile, Republicans have themselves convinced that we can just cut $2 trillion from the budget without any new taxes.
While neither is completely right, Democrats are probably closer to reality. The United States has a tax-to-GDP ratio of 27.7%, while the average for other developed countries is 34%. So, it would make sense to increase taxes. At the same time, the United States has rampant wealth inequality not seen by other advanced Western economies. In terms of taxes, this means that we can increase tax rates on primarily high-income earners, and as a result see new revenue, as well as a decrease in wealth inequality. Contrary to the arguments made by many neoliberal economists, studies generally show that tax increases for high-income earners do not cause significant harm to the economy.
But, Republicans also have a good point. We have gotten used to spending enormous amounts of money and if we are trying to balance the budget, we should not just be increasing tax rates, but also decreasing spending.
I am not blind to the reality of the situation we are in. Americans are extremely wary of any tax raise, even if it doesn't impact them, and the chances of Republicans and Democrats teaming up to do what is right for the country seems unlikely. And, with the new President, this seems only more unlikely.
While the new President-elect has pledged to form a Department of Government Efficiency, better known as DOGE (which is not a real department), I have little hope that they will be able to achieve their goals. You cannot just cut $2 trillion in spending and not expect major negative economic impacts. What I do know about Elon Musk and his made-up department is that Musk’s influence over Trump and other Republicans is embarrassing for a country that has long prided itself on being a democracy.
Nonetheless, as young people, we have been left in a familiar place: getting the short end of the stick. The debt that was incurred by our elders so they could live good lives is now our problem and it is our generation tasked to pay it off.
Ignoring our debt problem doesn’t make it go away, and lawmakers need to take real action now to get our national debt under control.
Photo Credit: National Association of American Wineries
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