In July of last year, the nonpartisan Congressional Budget Office triggered panic when it warned that projected payments on interest on the national debt would outpace defense spending, as well as nondefense discretionary spending. And that interest payment would outpace Medicare spending by 2046.
Just 14 months later, the cost of interest on our $35 trillion national debt has already blown past these two benchmarks, beating the CBO‘s projections by a staggering 22 years.
Following the $1.45 trillion spent on Social Security, the $950 billion cost of borrowing comprised the second largest line item of spending by our federal government in the fiscal year that ended this past September. At $896 billion, Medicare came in a close third. Our entire national defense budget, at $826 billion, was the fourth-largest spending category for fiscal 2024.
Just in time for voters to head to the polls, the economic elite have emerged for their quadrennial pantomimes as debt hawks. They’re now pinky-promising that former President Donald Trump, the Republican nominee, would be worse for the national debt than Vice President Kamala Harris, the Democratic standard-bearer.
But the facts say otherwise. Harris and her boss, President Joe Biden, entered office with economic and job growth exploding as COVID-19 tailed off. Biden and Harris defied prescient warnings that the economy ran the risk of overheating after the 2020 COVID-19-induced bipartisan spending spree.
Instead, the federal government racked up a $2.8 trillion deficit for fiscal 2021, amounting to more than 12% of that year’s economic output. Although that number briefly dipped below 6% in 2022, the past two years of nearly $2 trillion subsequent annual deficits have brought our deficit-to-GDP ratio to roughly 7%, the same as in 1946, when the government was paying back debt for a world war.
The data belie Harris’s repeated assertion that insufficient taxation is fueling our ballooning deficit crisis. While Harris has attacked Trump’s 2017 Tax Cuts and Jobs Act as a handout to the rich, federal income taxation has become increasingly progressive: Income tax payments by the top percentage of earners increased by 19% from 2019 to 2021. But more importantly, tax revenue has continued to boom even as the TCJA remains in effect. (Either Trump or Harris will be responsible for the fate of key provisions of the TCJA, which begin to expire next year.)
In other words, if the tax cuts enacted by Trump created surplus tax revenue by boosting economic growth, then simply reversing those tax rates, especially the corporate tax rate, which was rendered globally competitive by the TCJA, would likely reduce overall tax revenue, not increase it.
Profligate spending must stop
The problem, plain to see, is spending.
The federal government spent $6.8 trillion in 2024, 11% more than in 2023 and, in nominal terms, $200 billion more than we spent in 2020, the actual year of the pandemic. Mandatory entitlement spending, which, to be fair, Trump and Harris are equally abysmal in their refusal to do nothing to curb, rose by 7% in 2024 to nearly $3 trillion. Net interest payments on the debt, however, rose by 34% in just one year. The sheer cost of debt comprised 12% of all federal spending, up from 8% in 2017.
Inflationary spending, here, is both cause and effect. The multitrillion-dollar totals of the ARP, Inflation Reduction Act, and unilateral student debt cancellations triggered inflation, which forced the Federal Reserve to hike interest rates while bond markets organically priced in the declining solvency of federal coffers. Excess spending by Biden and Harris didn’t then just increase the sheer amount of debt taken out by the federal government, but it also increased the rate of that borrowing.
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Trump was by no means conservative in his spending. Even before COVID-19, his government averaged a deficit-to-GDP ratio of 3.9%, a little higher than the 3.7% averaged between 1993 and 2022. But even with COVID-19, the government still took about $6 trillion of debt. Compare that to the more than $7 trillion shelled out by Biden and Harris despite inheriting a rebounding economy aided by vaccines developed more quickly than ever before in history.
The Trump and Biden-Harris records comparatively speak for themselves, and on the deficit, it’s no contest.