February 19, 2024
How did our nation accumulate so much debt?
This question is on the minds of many folks. Back in 2001, the Congressional Budget Office (CBO) estimated then-current policies would eliminate the national debt by the end of 2009. Instead, the national debt went from 32% of gross domestic product to today’s 98% of GDP.
Was this because of revenue? Or was it because of spending?
The Committee for a Responsible Federal Budget (CRFB) studied the issue. The CRFB said the 98% of GDP our national debt commands breaks down as such:
- 37% from major tax cuts (i.e., less revenue)
- 33% from discretionary spending increases and Medicare expansion
- 28% from response measures to the Great Recession and COVID-19 pandemic
Tax and spending legislation that enjoyed wide bipartisan support explains most of the growth:
So, it wasn’t one party that caused it – the debt-increasing legislation was agreed upon by all. As a result, deficit growth is due to higher spending as a share of GDP (67% of the growth) and declining revenues as a share of GDP (33% of the growth).
Let’s return to that earlier CBO estimate. If revenue and spending remained at 2001 levels, the CBO indicates the national debt would’ve been paid off entirely by 2011. Much of the added spending that spiked our debt was already built in by pre-2001 legislation, enabling pre-programmed growth in big government programs like Social Security and Medicare.
Today’s conundrum essentially can be attributed to spending that outpaces revenue and a failure to keep the two in balance. No wonder politicians barely mention our debt anymore.
As I often like to say on this topic – it’s simple math. You can’t spend more than you bring in, whether you’re an individual, a family, or a country.