The National Debt- someone else's problem?

“The principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale.”― Thomas Jefferson

“Blessed are the young, for they shall inherit the national debt.”― Herbert Hoover

Wouldn't it be great to have an unlimited credit card that you never had to pay back? You could just let the balance grow and grow, leaving someone else to worry about it long after you're gone. That is essentially our national debt.

In 1975, America was emerging from a long, expensive war in Vietnam. The national debt stood at about $500 billion—roughly double what it was in 1950—but economists weren't overly concerned because its share of the economy (the debt-to-GDP ratio) was only about 23%. At that point, taxes were significantly higher than they are now, and government investments in the interstate highway system, the GI Bill, Cold War defense, and the Great Society were popular and well-funded.

This all shifted with the election of Ronald Reagan in 1980. The Reagan administration cut taxes significantly, arguing that the increased economic activity generated by those cuts would more than pay for themselves. In addition, Reagan implemented substantial cuts to popular programs like Social Security, Medicaid, food stamps, and education—the first major assault on the New Deal safety net in 40 years.

This experiment in trickle-down economics largely fell short of its promises. The tax cuts did not pay for themselves, and the budget deficit tripled, adding heavily to the national debt. Even with spending cuts, budgets couldn't be balanced, prompting small tax hikes late in Reagan's term. By the time Reagan and George H.W. Bush left office, the national debt had climbed to over $4 trillion—more than four times what it had been when Reagan first took office.

You might think American leaders would have learned from that experience, and in a way, they did. They learned that rich donors favored big tax cuts, that deficit spending didn't prevent a remarkable stock market bull run during the 1980s, and that cutting spending was politically viable as long as the beneficiaries could be marginalized.

Fast forward to 2001 and the George W. Bush administration. Deficit spending and tax cuts were back in vogue. President Bush pushed through a series of tax cuts that also promised to pay for themselves, but failed to do so. Simultaneously, America fought two expensive wars in the Middle East without raising taxes to pay for them. With a growing stock market and enthusiastic support from corporations and wealthy donors, the deficit exploded, pushing the debt to $10 trillion by the end of the Bush presidency.

Compounding this trajectory, the end of 2008 brought the Great Recession—one of the worst economic crises in decades. Tax revenues plummeted, and emergency bailouts became necessary to stabilize the economy, putting even more expenses on the national credit card.

In 2017, the Trump administration pushed through another major tax cut, which primarily benefited corporations and top earners, once again relying on unfulfilled promises of trickle-down growth. The COVID-19 pandemic in 2020 further accelerated deficit spending, and by the end of 2021, the debt had more than doubled again to $28 trillion.

Today, it stands at nearly $40 trillion—roughly $115,000 for every man, woman, and child living in the U.S.

For fifty years, politicians and pundits have worried and pontificated about the national debt, yet little changes. Voters on the right consistently oppose tax increases, while voters on the left oppose cuts to popular government programs. Furthermore, few politicians are willing to touch America's substantial defense spending, which has grown to nearly $1 trillion—nearly double the inflation-adjusted defense budget of 1975.

Is This Sustainable?

Could everything come crashing down at some point? Two critical metrics demand attention: annual interest payments and the debt-to-GDP ratio.

• Interest Payments: The U.S. currently pays over $1 trillion per year just in interest to holders of U.S. debt, and that figure continues to rise. This interest must be paid, as a default would collapse the global financial system. As interest payments consume a larger share of federal spending, they risk crowding out vital public programs.

• Debt-to-GDP Ratio: This metric measures the national debt relative to the size of the economy. U.S. debt-to-GDP has risen from 23% in 1975 to nearly 100% today and is projected to pass 120% within the next decade. Economic growth is never guaranteed, and another recession could accelerate this strain. While other nations carry debt, few have borrowed as heavily relative to their economies, with Japan being a notable exception.

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What Comes Next?

This is a problem very few ordinary citizens created, yet it is continuously passed down from generation to generation. Eventually, major structural changes will be required, including a combination of tax adjustments, spending reforms, and difficult economic choices. Because the wealthiest tier has benefited disproportionately from decades of deficit spending, equity suggests they should bear a commensurate share of the correction.

Nations cannot borrow their way into prosperity indefinitely. At some point, economic growth must be sustainable on its own—requiring hard work, sound fiscal policies, and leaders willing to face economic realities. The sooner we embrace that truth, the less painful the outcome will be for future generations.

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