October 28th 2023.
In February and August 2023, a worrying warning was issued by CNN and Fox Business that payments to America’s national debt would rise exponentially. This was due to the Federal Reserve’s decision to raise the interest rate in order to combat the increasing inflation costs. According to Statista, in 2022, the U.S. government spent a whopping 724 billion dollars on interest of public debt, a figure that is nearly double the expenditure seen in 2012.
Maya MacGuineas, President of the bipartisan Committee for a Responsible Federal Government, spoke to Business Insider about this worrying statistic. She said, “The way one evaluates that is: if your debt is growing faster than your economy, which ours is, and if your interest payments are going faster than — take any indication, whether it’s your economy, income, a variety of things — those are all huge warning signs. All of them are going off right now.”
In June, the United States narrowly avoided defaulting on its debt. This debt must be settled before any budgetary decisions can be made, and in four years, it is projected that spending on the national debt will outpace the amount of money spent on education, defense, and the social security program. MacGuineas expressed the lack of political will on either side to make the necessary changes to decrease the debt, such as raising taxes on the wealthy and the middle class, as well as decreasing the amount of money spent on things like the military.
“We know how to do that. There are many sensible plans out there. We don’t have the political will. And in this hyper-partisan environment, politicians are busily promising that they won’t do all the things that are exactly what we need to do,” MacGuiness added.
Nobel Prize laureate for economic sciences, Paul Krugman, agrees with MacGuineas. However, he does not see a way to increase taxes that will lead to a decrease in the debt payments, as Congress is split on the matter, largely along partisan lines.
Krugman told Insider in October, “The problem is obvious. Conservatives always want to cut taxes, especially for the rich, even though polls suggest that most Americans believe that the rich pay too little. But I don’t see any plausible political path to a tax increase that would make a large dent in the deficit.”
Krugman has spent much of the last few years warning the public that a large debt figure in and of itself is not the problem. Rather, the issue lies with the increasing national interest rate, which means it will cost more to both pay down existing debt and take on new debt. Steve Phillip wrote an Op-ed for The Guardian in which he suggested that the Republican Party is willing to hold the country hostage to get what it wants, despite the fact that the majority of Americans would rather see the debt ceiling raised to avoid a default.
President Joe Biden has also gone on record saying that the Republican Party is “literally, not figuratively, holding the economy hostage” in regards to its approach to negotiating a new budget, which now has a November 2024 deadline and has yet to be approved.
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