The Debt Will Explode

Since before the election, Republicans have talked about enacting a budget full of tax and spending cuts they claim will bring the deficit under control. The House and Senate have submitted their proposals, but must still reconcile the two bills into a single unified budget.

Now that tariffs have been pulled back, erasing any claims that they will solve our budget problems or create a magical scenario to refinance our debt, we can look closely at how neither the House nor Senate has put forward a plan to reduce the debt. Instead, they have opted to explode it over the next decade to dangerously high levels while cutting programs that help everyday Americans in favor of further enriching billionaires.

The Congressional Budget Office estimated that the approach of making Trump’s Tax Cuts and Jobs Act, which is set to expire at the end of this year, permanent, would raise the US debt to over 200% of GDP by 2047 and 250% by 2054. That is not reigning in the debt. Penn Wharton warns that we are in serious economic danger if America’s debt reaches 200% of GDP. In contrast, doing nothing else to the budget other than letting the Trump Tax Cuts expire would have US debt climbing to 166% by 2054.

None of this should be surprising because taxes are revenue, and continually cutting revenue increases debt. If the Bush and Trump tax cuts were never implemented, revenue would keep pace with spending, and our debt burden would decrease.

To frame it another way, the Bush and Trump tax cuts are responsible for 57% of the increased debt burden since 2001, and account for 90% if you take out the one-time stimulus measures during the Great Recession and COVID. 90% of all of the avoidable debt is from Republican tax cuts.

Read more about the effect of those tax cuts here: https://www.americanprogress.org/article/tax-cuts-are-primarily-responsible-for-the-increasing-debt-ratio/

Graphs make this easy to see. The first graph shows the debt-to-GDP ratio from just before America entered WWII to today. You can see that America took on unprecedented debt to fight the war at the time. After the war ended, the debt was brought back down to low levels until the Reagan era began.

To see why America’s debt rose so much to be even higher than during WWII, look no further than the top income tax rate.

Income tax is predominantly paid for by the wealthy. This is because of simple math. The median income in America is $40,000. Someone who makes $1,000,000,000 would pay the same amount as 25,000 average Americans with a flat tax. We use a progressive tax because the more money someone makes, the more disposable income they have and, therefore, the larger tax burden they can handle. Even with this structure, the rich continue to get richer. If the tax percentage is correct, they get richer while the country reduces its debt and increases its prosperity, which benefits them further.

Reagan was the one who began the idea of enacting massive tax breaks for the wealthiest Americans with the notion of Trickle Down Economics, the belief that the rich would put more money back into the economy and the hands of the workers if their tax rates were lower. This idea has never worked, but that hasn’t stopped Republicans from continually reducing taxes. That is why the working class struggles with two full-time jobs to keep food on the table, and the middle class can’t afford houses or healthcare. When you reduce taxes on the wealthy but don’t substantially increase working and middle class wages, you take on debt.

Politicians, billionaires, and their lobbyists have pulled off an amazing trick. They’ve convinced the people who benefit the most from higher taxes on the wealthy that all taxes are bad. They’ve created a narrative where the richest Americans, who earn more in an hour (yes, a single hour) than most Americans will earn in their lifetime, are the victims of a money-hungry government and people who want to live off of handouts instead of working.

That should be easy for people to see through, yet it works. People believe it and demonize the needy instead of the greedy. The majority of federal aid recipients are working, recently worked, or will work again soon. The assistance is transitory as people get back on their feet after a tough time.

If you believe the narrative that taxes are bad, then saying otherwise likely won’t convince you. So instead, let’s look at how it is impossible to cut away our deficit, meaning the only way to solve our debt is with higher taxes.

In 2024, the federal government brought in $4.9 trillion in revenue and had a deficit of $1.8 trillion. Let’s examine federal spending with the following understanding:

• Social Security does not add to the debt. It is funded by its own tax and is prevented from borrowing money to pay benefits.

• Trump has said he wants to raise the military budget to $1 trillion from the $872 billion it cost last year.

• Trump has said he doesn’t want to cut Medicaid.

• We have to pay the interest on our existing debt.

Spending:

• Social Security (2024) - $1.5 trillion

• Military (2025 request) - $1 trillion

• Healthcare (2024) - $912 billion Medicaid, $626 billion Medicare and CHIP, $125 billion ACA

• Interest on debt (2024) - $892 billion

That already totals $4.3 trillion, excluding Medicare and the ACA, and $5.05 trillion with them. We’ve used up all of the federal revenue and haven’t covered the $526 billion for veterans and federal retirees, $476 billion for economic security programs, and the costs for education, transportation, law enforcement, research, and international programs.

America can not cut its way out of debt. We must:

• Restore higher taxes on the wealthiest Americans up to a 66-70% top income tax rate.

• Increase worker pay to both increase quality of life and tax revenue.

• Remove the cap on Social Security taxes to keep the program fully funded.

• Enact universal healthcare to reduce costs for all Americans.

Until we change our mindset from thinking taxes are bad to understanding that they are necessary and, when done right, a positive benefit to the nation, we will continue to worsen our debt, increase income inequality, and make life harder for working-class Americans.

Stop listening to the billionaires and start fighting for yourself.

https://finance.yahoo.com/news/us-debt-could-explode-above-171734212.html

https://www.americanprogress.org/article/tax-cuts-are-primarily-responsible-for-the-increasing-debt-ratio/

https://www.cbpp.org/research/federal-budget/where-do-our-federal-tax-dollars-go