Surging National Debt Threatens To Upend Trump’s Economic Agenda, Even Without the Impact of Tariffs

In the five minutes required to read this column at a leisurely pace, pausing to sip coffee, the nation will pay $11 million — about $38,000 a second — toward servicing the national debt. Today, Congress is debating how many trillions to increase the debt.The debate concerns extending or revising portions of, or perhaps extending all of, the first Trump administration’s 2017 Tax Cuts and Jobs Act. Since then, the 75 percent increase in federal spending has far exceeded the 58 percent increase in revenue. Such an imbalance is an accelerating consequence of the changed relationship between the citizenry and the federal government that began 90 years ago.In the 19th century, this government touched most Americans — other than Civil War veterans receiving pensions, the first large federal entitlement — rarely and tangentially: when they sent or received mail, or bought something taxed by tariffs. Yet the post-1935 growth of federal social welfare programs — principally Social Security, enacted in 1935, and Medicare and Medicaid, in 1965 — has, as James C. Capretta of the American Enterprise Institute says, “put the government in a direct financial relationship with millions of individual citizens.”In 2024, spending on those three programs “equaled 10.8 percent of [gross domestic product], up from 3.7 percent in 1970. That large jump in spending was not matched by an increase in revenue,” which, as a percentage of GDP, was lower in 2024, at 17.1 percent, than in 1970, at 17.4 percent.On March 27, the spoilsports at the Congressional Budget Office released their Long-Term Budget Outlook. Their projections refute rosy scenarios, even without factoring in the slower economic growth that President Trump’s tariffs will cause. The CBO expects: By 2055, the national debt will grow to 156 percent from today’s 122 percent of GDP, which would be 37 percentage points above what it was in 1946, after borrowing to fight a global war.Mr. Trump’s economic agenda, from taxes to tariffs — which are themselves taxes — is variable because he believes in the immediate translation of whims into policy proposals, without an intervening pause for study. His conversation with a Las Vegas waitress quickly became his proposal to end taxation on tips. Commerce Secretary Howard Lutnick says Mr. Trump suddenly favors eliminating “taxes” on people making less than $150,000 a year — in 2022, about 93 percent of Americans 15 and older.If Mr. Trump is referring only to income taxes, that would mean — according to Jared Dillian, writing for Reason — that only 7 percent of Americans would pay any income taxes. Already, the top 1 percent of earners provide about 40 percent of income tax revenue, and the bottom 50 percent provide about 3 percent.Progressives want income taxation to be more progressive so the wealthy will pay “their fair share.” Mr. Trump is more progressive still, wanting the wealthy to pay everyone else’s share, too.There would be an even larger moral hazard problem — an incentive for perverse behavior — than there already is if 93 percent of income tax filers were not paying for the government from which they always want increased benefits. Mr. Lutnick says, however, that Mr. Trump wants to eliminate “taxes” — not specifically income taxes — from those earning less than $150,000.So presumably, Mr. Trump means under-$150,000 earners would escape payroll taxes, too, given that most of those people pay more toward Social Security and Medicare than in income taxes. This is “aspirational,” Mr. Lutnick says. It also is delusion, arithmetic says.Social Security’s total income in 2023 was $1.35 trillion, with 91 percent of that derived from payroll taxes. Trump might insist that his tariffs will raise $1.35 trillion, although presumably his optimum tariff revenue would be zero, with Americans’ dollars flowing exclusively to American companies.As, second by second, the government borrows substantial sums to pay interest on the money it has borrowed, remember: The national debt was $20 trillion when Mr. Trump began his first administration, having vowed to eliminate the debt in eight years. It was $28 trillion when President Biden’s presidency began. As Maya MacGuineas at the Committee for a Responsible Federal Budget notes, it reached $32 trillion on June 15, 2023; $33 trillion 92 days later; $34 trillion 105 days after that; $35 trillion in another 210 days; and $36 trillion in another 118. It will reach $37 trillion after Congress raises the debt ceiling sometime this summer.All of these numbers reflect the optimistic, perhaps fanciful assumptions that the post-“Liberation Day” economy does not sag into a recession. In any case: This. Will. Not. End. Well.

Surging National Debt Threatens To Upend Trump’s Economic Agenda, Even Without the Impact of Tariffs

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