Coverage of President Biden and Congress’ fight over raising the debt limit has focused largely on the politics, negotiating strategies, and (the very real) dangers of default.
But lost in the debate has been the real problem: the unsustainable deluge of red ink that is forcing Congress to raise the debt limit for the 20th time in the past 20 years.
In fact, since the last major debt limit fight in 2011, the national debt has more than doubled, from $15 trillion to $31 trillion. That is in just 12 years.
This recent $16 trillion debt surge has been bipartisan.
The $3 trillion in mostly justified pandemic relief was largely unavoidable.
However, President Donald Trump signed a large tax cut, and both parties drastically expanded discretionary spending.
Then President Biden enacted $5 trillion in federal expansions in just two years, including the inflation-driving $1.9 trillion American Rescue Plan, more discretionary spending hikes, and student loan bailouts.
Biden’s one law that supposedly reduced deficits — the ironically titled Inflation Reduction Act — now shows a dramatic deficit increase resulting from the law’s green subsidies going over budget by as much as 2,686% (yes, you read that correctly).
Social Security, Medicare, and Medicaid costs continue to rise steeply as well.
Thus — even as tax revenues surge to near-record levels — annual budget deficits have leaped to $1.5 trillion, and are projected to soar to $3 trillion in a decade.
The total national debt is projected to leap by $20 trillion over the decade even if the 2017 tax cuts expire on schedule. Interest costs alone will shatter previous records even if interest rates remain low.
And, no, simply taxing the rich won’t cut it.
Seizing every asset and every dollar of wealth from every billionaire would fund the federal government (one time) for eight months — while also liquidating much of the stock market and your 401(k).
Taxing millionaires at a 100% rate, and reimposing the highest corporate tax rates in the developed world, wouldn’t come close to closing this fiscal gap, either.
In reality, middle-class taxes would have to nearly double to pay for all the promised long-term spending.
That is why attaching spending savings to the debt limit is so important.
While Congress cannot solve the national debt in one bill, it can shave a few trillion dollars off that projected $20 trillion ten-year deficit.
After discretionary spending surged by 23% in two years, the Republican House-passed bill would return this category to the 2022 levels that prevailed just eight months ago.
Unspent pandemic aid would also be returned to the Treasury. Some regulatory barriers to building infrastructure would be streamlined.
Don’t believe the complaints that using debt limit legislation to address the underlying debt represents some unprecedented breach.
The eight largest deficit reduction laws since 1985 were all attached to debt- limit hikes. This includes the 1990 Bush tax hikes and spending cuts, the 1993 Clinton tax hikes, the 1997 balanced budget deal, and the 2011 Budget Control Act.
In fact, you have to go back to the 1983 Social Security reforms to find the last major deficit reduction law that was not attached to a debt-limit increase.
Most of these savings occurred in the 1980s and 1990s — when a 6% of GDP deficit was transformed into a budget surplus. Back then, nasty debt-limit showdowns were rare because both sides recognized the need to include fiscal reforms.
More recently, only three of the past 14 debt-limit increases have been “clean,” as both parties have repeatedly held the debt limit hostage to their priorities.
During the 2017, 2018, and 2019 debt-limit negotiations, congressional Democrats demanded and received more than $620 billion in additional spending.
And the majority of House Democrats still voted against raising the debt limit in 2018.
The main difference now is that Republicans are the ones using their leverage.
And — while lawmakers can disagree on the specific savings targets — today’s Republican approach of attaching deficit savings to a debt-limit bill was not even controversial for much of the past 40 years.
Indeed, President Biden’s insistence on a clean debt-limit bill represents the departure from typical practice.
But if lawmakers continue to reject commonsense deficit reductions, then the budget deficit — and eventually middle-class taxes — will double once again.
Brian Riedl is a senior fellow at the Manhattan Institute. Follow him on twitter @Brian_Riedl.