The gargantuan national debt is finally starting to matter.
Usual wobbles in the market for Treasury securities suggest the US government may finally be issuing more debt than investors can absorb. The annual deficit normally shrinks in a year with strong economic growth, yet it ballooned 23% in 2023 to $1.7 trillion, the biggest budget hole ever for a year with no emergencies. Federal Reserve Chair Jerome Powell says addressing the $34 trillion national debt should be an “urgent” priority.
Yet it’s not. Virtually all of the spending bills Congress has passed or will pass this year will rely on vast amounts of borrowing to keep the government running. Neither Joe Biden nor Donald Trump, the likely presidential candidates, highlights debt reduction as a top agenda item. Each political party, meanwhile, blames the other for the massive debt, with many politicians obscuring the whole issue with doublespeak.
Yahoo Finance decided to settle at least one question: Who’s responsible for all that debt in the first place? The unsurprising answer: just about everybody. Republicans and Democrats alike have passed laws and imposed policies that have pushed the debt from healthy levels to unmanageable ones during the last 25 years. Many voters bemoan the vast national debt, yet the electorate has broadly supported — and benefited from — many of the policy moves that created it, through lower taxes and plusher government benefits.
We asked the budget hawks at the Committee for a Responsible Federal Budget (CRFB) to help identify the specific laws and other programs that have pushed the debt to unmanageable levels. As CRFB points out, the US government actually ran a surplus (for the last time) in 2001, and the budget outlook was upbeat. The Congressional Budget Office (CBO) projected that, on the trajectory at the time, the whole federal debt would be paid off by 2009.
Then came 23 years of tax cuts and spending hikes that in retrospect look like fiscal insanity, pushing the amount of federal debt held by the public from $3.3 trillion in 2001 to $26.3 trillion at the end of fiscal 2023. There’s another $7 trillion in “intra-governmental debt” held by government agencies such as the Social Security Trust Fund, with the total national debt hitting $34.2 trillion as of Feb. 1, 2024. For this analysis, we’re addressing the amount of publicly held debt, which represents all the Treasury securities traded in financial markets.
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CRFB finds that 77% of the actions accounting for all the new debt since 2001 were bipartisan, with meaningful support from both Democrats and Republicans. Much of that was fiscal stimulus following the 2008 financial crash and the outbreak of COVID in 2020. Partisan Democratic actions — mostly spending hikes — account for 12% of that additional debt, while partisan Republican changes — mostly tax cuts — account for 8%.
The charts below show the main sources of that $23 trillion in new debt in two ways: as a cumulative lump sum at the end of 2023, and how they grew over time. Here’s additional detail on each of the biggest debt contributors since the fiscal follies began in 2001:
The Bush tax cuts of 2001 and 2003
Addition to the debt: $2.2 trillion. The first tax cut George W. Bush signed into law in 2001 was a stimulus measure meant to boost the economy after the dot-com bust. It lowered tax rates for most workers and got some bipartisan support. The second one cut business taxes and passed with mostly Republican votes. Most of the changes in both laws were set to expire after several years.
Iraq and Afghanistan wars
Addition to the debt: $4.3 trillion. Estimating the exact cost of these two wars, which both began under Bush, is tricky because some of the costs are intermingled with regular Pentagon funding, and vice versa. CRFB identified $4.3 trillion in new debt attributable to war spending and higher overall defense costs. Both wars were largely financed by borrowing because Congress never raised taxes to cover the costs as it did during prior wars. Support for both wars was bipartisan at the outset, but support waned as both operations dragged on and the pretext for the Iraq war in particular began to look fishy.
Medicare changes
Addition to the debt: $1.1 trillion. One big component of this category is the Medicare Part D coverage Bush signed into law in 2003, giving beneficiaries prescription drug benefits. Another is the “doc fix” Obama signed into law in 2015 that boosted payments for doctors. Both measures had bipartisan support.
Great Recession stimulus
Addition to the debt: $1.5 trillion. This includes a small stimulus bill Bush signed with bipartisan support in 2008 and the much bigger stimulus measure Obama signed in 2009 with mostly Democratic support.
Obama tax cut extensions
Addition to the debt: $5 trillion. Obama signed bills in 2010 and 2013 making most of the Bush tax cuts permanent. Each measure passed with some support from both parties.
Trump tax cut of 2017
Addition to the debt: $1.3 trillion. This law slashed taxes for both individuals and businesses. The business tax cuts were permanent, but the individual cuts expire at the end of 2025. Republicans who passed the law with no Democratic support banked on pressure to make the individual cuts permanent once expiration drew near, much as Obama extended the Bush tax cuts.
Trump-era COVID stimulus
Addition to the debt: $3.2 trillion. This includes several measures Congress passed and Trump signed after the COVID outbreak in 2020 with bipartisan support.
Biden-era stimulus
Addition to the debt: $1.8 trillion. This was the American Rescue Plan, which Democrats passed after they took control of the White House and both houses of Congress in 2021.
Regular spending increases
Addition to the debt: $2 trillion. These occur in small ways every year in legislation for all manner of government programs, including natural disasters and other emergencies, that often have bipartisan support.
A few big measures Congress passed during this 23-year time span aren’t on the list, because they didn’t add substantially to the national debt. The Affordable Care Act Congress passed in 2010, for instance, provided healthcare coverage to millions of Americans, which was expensive, but it also included new taxes and cost reductions to pay for it.
Some measures contain new revenue sources to cover the cost that end up being insufficient. The green energy bill Democrats passed and Biden signed in 2022 included new revenue sources that would supposedly help lower the debt. But the eligibility for new green energy tax credits is open-ended, and applications are far higher than expected, which means the law could end up costing way more than forecast and add to the debt instead of reducing it. Oh, well.
The worst budget chicanery may be the Republican mantra that cutting taxes will boost economic growth so much that more people will work and earn money and the national debt will get smaller rather than larger. The data clearly shows that this has never happened in modern times. Alas, there aren’t many others who have credibility on the national debt, either.
Rick Newman is a senior columnist for Yahoo Finance. Follow him on Twitter at @rickjnewman.
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