Opinion: The painful mistakes that got America into its current debt troubles

Editor’s note: Maya McGuineas is chair of the bipartisan Committee for a Responsible Federal Budget (CRFB). All opinions expressed in this commentary are her own. Further comments On CNN.

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There are several signs of government financial mismanagement that no country should ignore: increasing debt without justification, interest payments that strain other parts of the budget, and promising future benefits with no plan for how to fund them.

Unfortunately, this accurately describes the way America has been operating for quite some time now, yet neither of the leading presidential candidates has any serious proposals for addressing these worrying trends.

In just three years, and despite a strong economy, Not only does the debt exceed the size of the economy, The U.S. debt-to-GDP ratio has surpassed the all-time high of 106% set just after World War II and will continue to grow indefinitely. Only three developed countries are worse off in debt than the U.S.: Japan, Italy, and Greece.

Additionally, interest payments on the debt have reached nearly $900 billion this year, making it the fastest growing item in the budget and higher than the defense budget. And our leaders refuse to fix the Social Security pension system, even though it will be insolvent within a decade and would lead to major cuts in benefits for retirees.

Our nation’s fiscal situation is worrying not because of any particular president, any particular emergency, any spending or tax policy, or even any particular political party. It’s partly because of appropriate borrowing in response to recessions and emergencies, but mainly because politicians (and voters) don’t want to foot the bills that are passed.

The last time the government raised more in taxes than it spent on programs, it had a budget surplus. In 2001, the national debt was 32% of GDP and was on track to be paid in full. But massive tax cuts, spending increases, and anti-recession measures (which all increased the debt by roughly equal amounts) have now brought the debt closer to 100% of GDP. More than three-quarters of this debt came from bipartisan legislation.

The budget also includes large, automatic increases in spending. If non-interest spending were at the same level as today, According to CRFB’s analysis, the debt should have been nearly paid off the last time the company was in the black.

One of the most infuriating mistakes that got us to this situation was letting our guard down when interest rates were much lower. In recent years, many experts gave politicians a dangerous license to borrow by arguing that we didn’t need to worry about new borrowing, despite the clear risk that interest rates would rise again. And they did borrow — not just for the COVID-19 relief that was needed, but for tax cuts, new spending, and just about everything passed since the last surplus.

The one big exception was last year’s Fiscal Responsibility Act, which capped discretionary spending through fiscal 2025, the first major deficit reduction measure in more than a decade.

To be clear, the problem isn’t that we pushed through policies — many of which were very important — the problem is that we didn’t fund them. Like teaser rates on credit cards, low interest rates drove the country into more and more debt, but now that interest rates have risen, the cost of that massive debt is enormous.

If, instead of listening to the don’t worry, be happy, just borrow people, we offset all non-emergency policies and implemented a comprehensive debt reduction plan, CRFB calculations show that the debt could easily be below the current $10 trillion level, resulting in many economic benefits, including reduced upward pressure on inflation and interest rates, lower interest payments even if interest rates did rise, more private investment, faster growth, higher wages, and we would be better positioned to handle the next emergency.

And not just economically, we would be better off. With debt at a more manageable level, we would have the fiscal space to temporarily spread out the costs of paying for some of today’s biggest risks. From climate to cyber threats, to updating many of our social programs to reflect disruptions from new technologies. We will have greater flexibility to develop a comprehensive national security strategy in the face of new risks, including disinformation, increasingly aggressive adversaries around the world, and vulnerabilities from our reliance on foreign loans.

The need for fiscal consolidation is clear, but with the presidential election underway, the two leading candidates have barely debated the issue. Both President Joe Biden and former President Donald Trump have a track record of approving trillions of dollars in new borrowing, not including COVID-19 spending. Neither has offered anything close to a complete plan for debt reduction. And in an outrageous effort to curry favor with each other, both have promised to “protect” Social Security while taking reasonable steps to avoid doing so without offering any actual plans.

This campaign will be full of false fiscal myths. Let’s be clear: tax cuts are not self-financing, and neither are spending increases. Economic growth alone will not solve our fiscal problems. (But more growth is needed.) There is certainly plenty of room for higher taxes on the wealthy, but that alone will not be enough to solve the problems we face. Last year’s Bipartisan Fiscal Responsibility Act was a very important step in the right direction, but we cannot eliminate the debt by limiting discretionary spending alone. Revenue and mandatory spending programs need to be part of the larger solution.

Candidates must present the country with an honest plan for how they will implement their policies and put the debt on a sustainable trajectory. They should start with a simple promise not to add to the debt unless there is a genuine emergency. But they need to go further. Nearly every other issue they care about — national security, economic growth, global competitiveness, inflation, climate change, investing in future generations — will remain vulnerable until there is a credible plan in place to get the debt under control.