A few months ago, the federal debt we have accumulated over the past decades crossed the $22 trillion mark. That’s a record.
According to government estimates, annual budget deficits over the next decade 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 said “no problem.”
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 than we spend on our children; 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 enormous amounts to pay the interest makes it harder for the government to respond to future challenges and raises the risk of an economic crisis with no gas left in the tank to accelerate out of it.
But attacking yearly deficits is politically difficult, requiring both spending cuts and tax increases. There’s little appetite in Washington for either.
The first rule for any policymaker should 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 onto 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’s true.
So do we need to panic? No. But we need to address the problem gradually rather than waiting for a crisis we all knew was coming and did nothing to prevent.
Lee Hamilton is a senior adviser for the Indiana University Center on Representative Government and a former Democratic congressman.