Opinion: Debt and its consequences must be front of mind amid swirl over reconciliation bill

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For most of my life, the federal government has run deficits. The reconciliation bill that was passed by the House in May and was under debate in the Senate on Monday is no different: The Congressional Budget Office projects the House version of the bill will increase the deficit by nearly $2.8 trillion and the Senate version by $3.3 trillion over the next decade. [Opinion editor’s note: Senate approval had not yet taken place as the deadline for this article was reached.]

Cynicism about these estimates is understandable. Many have grown weary after decades of watching policymakers use the debt as a cudgel to block spending, while conveniently ignoring it when it comes to tax cuts.

But even if you haven’t cared before, it’s time to pay attention. Debt builds on itself. To finance the deficit, we issue more debt. The more debt we take on, the more markets seem to get nervous about how it’ll get paid back — pushing the interest rate higher. The increase in interest rates was the stated rationale for Moody’s downgrade of U.S. sovereign debt in May. The projected increase in interest rates from the reconciliation bill alone is slated to add more than $440 billion in interest payments. Even prior to the reconciliation bill, the CBO projected we’ll spend more just on interest payments than all discretionary spending by 2055. “Discretionary” includes everything that isn’t Social Security and health care; the scope is larger than can be addressed by rooting out inefficiencies in federal offices or scaling back defense spending.

There are indirect consequences of growing debt that even the most dyed-in-the-wool progressive should care about. The growing size of the debt has led Congress and the White House to end spending on programs that are worthwhile, but which pay for themselves in the long term. The rise in Treasury rates also drives up the cost of borrowing for households, businesses and local governments, making it harder to invest in our families and communities. High inflation will inevitably result from trying to finance the debt by printing more dollars, and from the reduced capacity to produce that comes with fewer investments in capital, infrastructure and R&D.

Even those who want the government to do more should care about accumulating deficits. But how can we address it?

First, we have to overcome our annoyance with lawmakers who only care about the debt when it’s politically convenient. Even if they’re not taking it seriously, voters should.

Second, we must confront why the debt is growing. The majority of the deficit is “mandatory” spending on Social Security and Medicare/Medicaid. Even if we zeroed out all discretionary spending (defense, education, the works), the debt would still grow. We have to ask ourselves whether the current way we fund and administer these mandatory programs makes sense.

Third, looking to “cut waste” without thinking about costs and benefits is pointless. Economists broadly agree that in the long run, national debt can be sustained through economic growth. Growth comes from gains in productivity — creating more with the workers and physical resources we have. Research funding from the government has played a crucial role in supporting productivity growth over the past few decades. That same funding is being decimated by the White House by a distaste for higher education, rather than an interest in “gold standard” science. Sensible cuts must pay attention to what is gained and lost by ending government programs, in the short and long term.

Fourth — maybe most importantly — we have to think about revenue. The resources must come from somewhere. Under our current model, it’s paid for through inflation, reduced government capacity and ever-increasing interest payments. Yes, spending in some areas may need to go down, but revenues also need to go up. The debt will not be addressed by ending a handful of defense contracts or canceling research grants and data collection. Republicans and Democrats must accept taxes will have to go up, perhaps even upon middle-class households.

As Congress weighs the reconciliation bill and future legislation, they need to hear from voters, particularly younger voters who are staring down the consequences of decades of budgetary can-kicking and disastrous, short-sighted destruction of the federal government’s ability to do its job. They need to hear the message that the best time to address the national debt was two decades ago. Absent time travel, the second-best time is now.

Ethan Struby is assistant professor of economics at Carleton College in Northfield. The opinions expressed here are his own and are not intended to reflect those of his employer.