By Alexander McConnell
How much of a dilemma is America’s national debt? One common argument that aims to discount this ticking time bomb, points to the continuous decrease in treasury bond interest rates, thus indicating low borrowing costs. However, it is incorrect to assume that low borrowing costs will inhibit sky-high interest payments on the national debt. According to the Mercatus Center, even supposing current interest rates remain historically low (at around 2 percent), it is estimated that the United States will remain forced to pay over 1 trillion dollars in annual interest payments by 2037. This is simply unsustainable and must be resolved in a pragmatic manner.
Although numerous factors can be attributed to this issue, much of the debt can demonstrably be controlled, and recent consistent annual deficits can be blamed on both major political parties. The last time lawmakers arranged a successful annual budget surplus was addressed in a bipartisan manner through a Republican Congress and a Democratic President from fiscal years 1998 to 2001. Even though earlier marginal income tax rate increases were partially responsible for these surpluses, Republicans were able to negotiate estate and capital gains tax reductions while also shrinking the debt burden through cuts in certain domestic discretionary spending, namely in federal housing and labor programs. On the contrary, throughout the past 20 years (under both parties), the United States’ total debt has soared from just over 5 trillion dollars to well over 25 trillion dollars, and Republicans over the past 4 years, in particular, have done little to address that. President Trump’s signature legislation, the Tax Cuts and Jobs Act of 2017, was a distinct strain on the nation’s continuously growing debt, severing an immense source of federal revenue without addressing historic highs in government spending. As a result, it is estimated that the law will add almost 2 trillion dollars to the national debt over the next 10 years, and will account for approximately half of the added debt Trump is responsible for prior to COVID-19. Ironically, the Republican Party’s 2016/2020 platform does, in fact, include a provision on ways to reduce our national debt. It argues that Congress must take immediate action in order to slash unnecessary spending through the adoption of a constitutional balanced budget amendment, which would force strict constraints on the budgetary process by imposing “a cap limiting spending to the appropriate historical average percentage of our nation’s gross domestic product while requiring a supermajority [in Congress] for any tax increase.” This policy works in theory, but evidently, the Republican Party needs to be more practical given its inability to pass this amendment even with a trifecta-controlled government from 2017 to 2019. This is because a balanced budget amendment would require ⅔ support in the U.S. Senate: a vote that would be unlikely to receive bipartisan approval given the Democrats’ widely known backing of a tax and spend agenda. Instead of setting unrealistic goals, the GOP should look to the golden years of 1998 to 2001, and recognize that a constitutional amendment is not required to balance the budget. However, the party must, above all else, prioritize matching tax cuts with appropriate reductions in spending.