A Refresher on the National Debt—and Why It Matters for Millennials
Abortion, gun control, and immigration may dominate the headlines (and for good reason), but the national debt remains one of America’s most persistent problems. The fact that budget deficits aren’t “clickbait” material shouldn’t overshadow either the extent of the problem or the need to address it.
The American people certainly see addressing it as a dire need. According to the Peter G. Peterson Foundation, more than 80 percent of Americans believe that elected officials should spend more time addressing America’s debt crisis. Nearly 60 percent claim we are moving in the wrong direction on fiscal issues.
While the reasons behind the rapidly increasing national debt are not necessarily common knowledge, Americans generally understand that the U.S. economy is saddled with lots and lots of it. The facts are startling:
- This year, the federal government’s total debt surpassed $22 trillion—the highest in U.S. history. In per capita terms, that comes out to $61,539 in public debt per person.
- Our national debt now exceeds gross domestic product (GDP)—that is, total U.S. economic output. National debt stands at 110 percent of GDP, which is the highest debt-to-GDP ratio since World War II (118 percent).
- That’s right: the Debt-to-GDP ratio is on the rise. In the early 1980s, debt accounted for 30 percent of GDP. By 1995, that number was 65 percent. Today, we sit at 110 percent!
So what does it all mean? For starters, it’s important to understand what “national debt” actually means—the total amount of money that a country’s government has borrowed, by various means. The federal government adds to the debt by spending more than it receives in tax revenue. In other words, each year’s budget deficit is added to the national debt, while a budget surplus is subtracted.
Unfortunately, it’s been a long time since the federal government sat on a surplus. The last time was in 2001, when the government ended the fiscal year with a budget surplus of $127 billion—down from $237 billion in a year earlier, but still in the black.
We’re nowhere near the black today. The U.S. budget deficit recently widened to $866.8 billion—a 27 percent increase since last year. This means that government expenditures far exceed tax receipts. Indeed, government receipts totaled $2.86 trillion from October 2018 through July 2019, while outlays came out to $3.73 trillion.
Much of today’s budget deficit can be traced to increased spending on health care and the military. Medicare outlays, for example, recently rose by 11 percent to $66 billion.
This does not bode well for Millennials, who are inheriting debt and deficit levels once thought unimaginable by their predecessors. The U.S. government is expected to add $12 trillion to the national debt over the next decade, bringing the debt-per-capita level to $70,000 per person—and beyond. As America ages and health care spending inevitably rises, the national debt is sure to follow, placing an even heavier burden on existing tax collection.
On our current pace, tax receipts are simply not high enough to keep up with government spending. Cue the cries for tax hikes. But America has a spending problem, and it’s up to elected officials to stem that tide.
They have a long way to go. The recently passed congressional budget deal, for instance, suspends the national debt ceiling through July 2021, while raising government spending by more than $320 billion. The budget deal is projected to add roughly $2 trillion to the national debt in the next 10 years, sinking America deeper and deeper in the hole.
Only by addressing our spending problem can we even hope to dig ourselves out. That requires a public commitment to fiscal responsibility and the political backbone on the part of elected officials to enact meaningful reforms.
Otherwise, the national debt will continue to rise at the expense of future generations—you, me, and our children.