My mentor and friend, Senator Tom Coburn, MD, stood in a long line of American statesmen when he warned the country about our reliance upon debt and the consequences it would have for future generations.
Virtually every US founding father agreed that debt should be handled carefully. Our nation’s first President told Congress that among financial matters, “no consideration is more urgent” than debt.
His fellow Virginian Thomas Jefferson named public debt among “the greatest of the dangers to be feared” by a free people. Even Jefferson’s adversary Alexander Hamilton, whose plan to federalize state debts drew Jefferson’s ire, warned that the debt could be “swelled to such a size […] as that the sums required to pay the interest upon it may become oppressive.”
With all the things a new republic had to see to, their concern about public debt may seem strange. But they knew, as Dr. Coburn knew, that debt is not an abstract figure on a ledger.
It is about people and their freedom, about protecting the possibility of self-government, and about each generation answering the call to leave a better world to the next.
Unfortunately, too few political leaders have been willing to answer the call of stewardship.
The result has been a slow-motion disaster. Interest on our nation’s debt has already become the second-largest government expense. Within a few years, it will be the costliest part of the budget.
Most Americans will remember the wave of inflation that afflicted the country during the last administration and doomed President Biden to a single term. At gas pumps and in grocery stores, Americans felt the consequences of overspending by the federal government, far beyond what was necessary to stabilize the economy during the Pandemic.
Interest on our nation’s debt has already become the second-largest government expense. Within a few years, it will be the costliest part of the budget.
What they might not know is that the chokehold of interest rates, which has dashed so many people’s dreams of homeownership, also stemmed from overspending. Efforts to curb inflation threaten to drive down investment, even as inflation stubbornly lingers, poised to wipe out years of productivity, hard-won prosperity, and earning power.
Benjamin Franklin once famously said, “better to go to bed supperless than to rise in debt.” But a nation that spends more on interest than investment in its strength and stability – indeed, a nation that borrows its ability to pay that interest – both rises in debt and goes to bed hungry!
How did we get here, and what can be done about it?
A quarter of a century ago, both Republicans and Democrats prioritized the concept of a balanced budget in Washington – a common-sense understanding that the Federal Government should spend the same as it brings in every year.
In the decade after Speaker Newt Gingrich, Senate Minority Leader Tom Daschle, and President Bill Clinton hammered out a balanced budget, two wars, an economic downturn, and growth in entitlement programs converged. This cooperation led to the first trillion-dollar deficits in our nation’s history around the time of President Obama’s stimulus package.
Budget hawks seized and politicized the growing national debt, but inaccurate and overzealous predictions, along with record-low interest rates, eased widespread public concern over the nation’s fiscal condition.
Meanwhile, some continued to sound the alarm. Demographic trends, such as the retirement of Baby Boomers, pointed to looming debt concerns.
In 2019, the Millennial Debt Foundation (MDF) was formed with Senator Tom Coburn, MD. The creation of the Millennial Debt Commission in early 2020 convened millennial business leaders with prominent members of the House and Senate to pursue a framework for debt stabilization. Around the same time, the Committee for a Responsible Federal Budget decried the coming “era of trillion-dollar deficits.”
But without a crisis, it seemed unlikely that public debt would take center stage soon.
Just weeks before the Millennial Debt Commission was set to meet for the first time, COVID-19 struck. Its mission to call attention to the potential perils of the national debt and offer solutions became timelier than we could have imagined. Record government stimulus and public health efforts ballooned the federal deficit from $984 billion in 2019 to more than $3 trillion in 2020 and nearly that again in 2021.
Experimental fiscal and monetary policy eased the jarring effects of lockdowns, but historic inflation throughout 2022 indicated the policies overheated the economy.
Preserving the financial standing of our nation for future generations should be a priority for both political parties. Stewardship is an American ideal, not a partisan talking point.
Preserving the financial standing of our nation for future generations should be a priority for both political parties. Stewardship is an American ideal, not a partisan talking point.
Instead of continuing to test the limits of how much we can borrow, we should debate the obligation one generation has to another, the potential consequences of excessive borrowing, and the ethics of saddling future generations with debt that must inevitably be refinanced.
That’s why we formed the Commission—to bring a new generational voice into the conversation. We recruited prominent millennial business leaders from across the country and a cohort of millennial members of Congress. Throughout 2020 and 2021, MDF heard briefings from current and former elected officials, economists, and policy experts. These meetings were the most significant bipartisan conversations about fiscal policy during the pandemic.
One of the overarching themes of the Debt Commission’s meetings was the need to change how we define the problem.
A growing number of economists will argue that the current $36 trillion in debt isn’t the problem but rather the $100 trillion we are set to borrow over the next 30 years. To understand the national debt problem and the solutions posited in this document, we need to consider the debt in proportion to the size of the U.S. economy, or our gross domestic product (GDP).
Using America’s “debt-to-GDP” ratio to quantify our debt will allow us to compare the U.S. to other countries and historical periods. It will also serve as a guiding measurement when formulating goals for the future.
Under current law, the Congressional Budget Office projects the national debt will grow from ~98% of the U.S. economy to more than 166% by 2054. Under CBO’s alternate scenario, debt-to-GDP could exceed 250%.
Thankfully, the sting of the last few years has begun to turn the tide. The national debt is polling again, and the groundswell of support for President Trump’s Department of Governmental Efficiency (DOGE) suggests the chance that responsibility may be due a day in the sun.
We offer these policy solutions to supplement their deliberations, recognizing that eliminating inefficiency at every level of government will still leave much to be done.
The path back to stewardship is not unrealistic.
The recommendations in this document demonstrate that the path back to stewardship is not unrealistic. Without reform, however, it will become more painful with every passing year.
With more than $100 trillion set to be added to the debt in the coming decades, we are no longer in a position where balancing budgets, let alone eliminating debt, is feasible. Instead, a patriotic call to stewardship should aim at stabilizing the debt, targeting a specific debt-to-GDP ratio, and emulating the fiscal measures enacted by other countries to hold Congress accountable to that goal. While higher inflation has slightly improved the nation’s debt-to-GDP trajectory, rising interest rates threaten to consume an increasing portion of the federal budget annually, leaving less room for the government to provide essential services.
In the pages ahead, we have proposed eleven recommendations to move the debt-to-GDP baseline from 185% to 99.2%. With the turn of each page, you will see America’s fiscal trajectory improve.
To be sure, the reforms we recommend will not all be popular on the campaign trail. But as our early advisor, Senator Tom Coburn, MD, proved throughout his career, the American people will support leaders who prioritize the country’s best interests over their own.