The $37 Trillion Problem: Addressing Our Ballooning National Debt

The total U.S. debt has reached an alarming $37 trillion and is skyrocketing by nearly $2 trillion each year. This is a serious situation that must be confronted immediately to prevent an unbearable burden falling on our children and grandchildren. But how did we get here?

Starting in 1962, a shift occurred when economists persuaded the Kennedy administration that the federal budget didn’t need to be balanced annually. They argued that, despite potential risks, the benefits of a consistently stimulated economy outweighed any drawbacks. The country could carry debt.

Once that philosophy took root, the government ran a deficit in 59 of the next 63 years. This led to the sale of trillions of dollars in bonds, primarily in $10 billion or $20 billion increments to the public. Over time, foreign investors, drawn by the perceived safety of U.S. bonds, purchased trillions worth of this debt.

A significant challenge arose when 10- or 20-year bonds matured — there was never any money available for repayment since the government was still deep in deficit mode and issuing more bonds. To pay off old bonds, the government would sell new ones, resulting in a continuous rolling over of debt.

This is why, aside from the brief period from 1997 to 2000, the public debt has kept rising. The government has been borrowing trillions each year without any mechanism for repayment, operating under the belief that debt is good for economic growth.

The size of the debt is a problem. Most economists will say that as long as the total debt is less than one year’s gross domestic product, it should be tolerable. Above that, it is a problem. The $37 trillion far exceeds this year’s GDP of $29 trillion.

What is the problem that a $37 trillion debt causes?

There are two primary concerns. First, when the federal government pulls $37 trillion out of capital markets, it creates a capital shortage. This means when businesses want to expand and seek capital, it will be in short supply, and it will be expensive. We are already witnessing this scenario today.

The second concern is the enormous interest expense associated with the debt. Last year, that figure was $880 billion, and it is expected to approach $1 trillion this year. That’s money that could go toward enhancing the lives of Americans or, better yet, be returned to taxpayers to improve their standard of living.

The annual interest expenses will continue to escalate as we incur more yearly deficits and as we roll over inexpensive prior debt. It’s clear we’re in a deep financial hole, and the first step to getting out is to stop digging. We must balance the annual budget immediately.

But why is balancing the budget so difficult?

The deficit stems from the government spending more than it receives in revenue. To eliminate this deficit, there are two options: cut spending or raise tax revenue. The Trump administration is committed to not raising tax rates on any American.

Instead, tax revenue will increase as Trump’s policies lead to more economic growth generating more taxable income and more tax revenue. Trump has also sought additional revenue streams, mostly from tariffs.

The focus must be on reducing government spending. In 2019, federal spending was $4.5 trillion; today, just six years later, it has ballooned to $7.3 trillion. While most politicians proclaim support for spending cuts, when reduction bills are brought to Congress, they usually fail to garner majority approval.

In reality, spending cuts are rarely implemented. The government typically redefines a “cut” as a reduction from a proposed increase. A case in point is when President Trump established a task force specifically designed to identify waste, fraud, and abuse.

That initiative unearthed hundreds of billions in clear examples of wasteful spending. Yet, even with a Republican president and a Republican majority in Congress, only a meager $9 billion was cut — much of that merely adjusted from a planned increase.

Government spending is way out of control. While President Trump advocates for spending reductions, each cut provokes disagreement from numerous politicians, and portions of the public respond with anger.

Nevertheless, addressing the debt problem must begin with eliminating annual federal government deficits. Now is the time to really cut government spending.

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