OPINION:
The United States’ current and recurring fiscal deficit of 6% to 7% of gross domestic product is the highest of any country in the Organization for Economic Cooperation and Development. High deficits in the past quarter century have caused the federal government’s total public debt to increase from $5.7 trillion in 2000 to over $35 trillion today.
Interest expense to service this debt exceeds defense spending and is the fastest-growing expense in the nation’s budget. But public debt is only the tip of the federal debt iceberg. Total federal liabilities and the present value of our unfunded commitments for future Medicare and Social Security payments have grown from $20 trillion in 2000 to more than $125 trillion in 2024 and will increase daily by about $16 billion.
Every major federal fiscal and monetary agency has stated that the U.S. is on an unsustainable fiscal trajectory. Unfortunately, the current deniers and holdouts include the presidential candidates of both major parties, neither of whom has offered a credible plan to put our federal finances in order.
Congress and the executive branch must solve the twin challenges of excessive full-employment fiscal deficits and a rapidly increasing debt-to-GDP ratio. The solution requires two immediate steps. First, we need a president who prioritizes this issue and will support difficult but necessary fiscal reforms. Second, we need a statutory Fiscal Sustainability Commission to educate and engage Americans and Congress about the dangers of the twin deficits.
The commission must also develop a comprehensive spending package and tax reforms to reduce the massive fiscal deficit and stabilize government spending at a level consistent with a lower and sustainable debt-to-GDP ratio. The commission’s recommendations would be subject to an amendment-free, up-or-down vote in Congress.
The package of fiscal reforms is not just about cutting federal spending. Government investment in physical and informational infrastructure, education and training, and scientific research remains necessary for the U.S. to remain attractive for companies to pay competitive wages consistent with high and rising living standards.
The U.S. also needs to spend more on defense to secure our freedoms. But such discretionary spending has been crowded out by the rise in spending for social insurance programs, on servicing the country’s enormous and rapidly increasing debt and on other mandatory spending, including pension and retiree health care benefits for military and civil service personnel. All this mandatory spending occurs automatically without congressional review or authorization, and most of it is indexed to increase with inflation.
In 1972, mandatory spending on entitlements was 49% of the federal budget. The percentage increased from 64% in 2012 to 73% in 2023 and is still rising. When tax expenditures are included, Congress regularly experiences periodic and well-publicized funding crises about decisions affecting only 15% of total annual expenditures.
Currently, tax revenue is below the post-World War II average as a percentage of GDP. Pro-growth tax reform to simplify the tax code and generate more revenue as a percentage of GDP will reduce some of the deficit. Further deficit reduction, however, requires a significant reduction in projected government outlays, which currently exceed the post-WWII average by a large margin.
Only a bipartisan fiscal commission, with strong presidential support, can produce a fiscal grand bargain that allows targeted stimulus investment in research and education, along with difficult, intelligent and politically acceptable tax reform, reductions in the growth rate of future mandatory spending commitments and in future discretionary spending on current consumption.
Actions to reduce the share of our nation’s output going to transfer and interest payments may seem draconian and unrealistic for politicians to even contemplate. Surveys show, however, that a supermajority of voters recognize the unsustainable fiscal trajectory the U.S. is on and would support major spending changes that, along with comprehensive tax reform, will put us on a more sustainable fiscal path. Voters understand that such fiscal discipline creates a more secure future and a higher standard of living for their children and grandchildren.
The U.S. needs further action if the fiscal commission’s recommendations are to be sustained in the future: a constitutional amendment that limits federal spending and debt, measured as a percentage of GDP. Swiss voters overwhelmingly approved such an approach in 2001, and it has been effective and popular since its adoption.
Only a constitutional amendment will bind future Congresses and administrations to pro-growth fiscal constraints and adoption of future grand bargains as needed. The amendment should include an option for emergency spending associated with a formal declaration of war or to address unexpected catastrophes. Such emergency spending would have to be authorized by annual supermajority votes in Congress with the concurrence of the president.
Our nation’s debt bomb is ticking, and time is not on our side to take the steps to create a better future for both America and Americans.
• David Walker served as comptroller general of the United States from 1998 to 2008, and is the author of “America in 2040: Still a Superpower?” Robert S. Kaplan is professor emeritus at Harvard Business School.
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