No matter how you look at it — as a fiscal hawk, a market watcher, or as someone simply concerned about the future we’re leaving for our children — our ever-growing national debt has become a tremendous threat.
We’re currently borrowing nearly $2 trillion annually and our national debt is about the size of our entire economy. We spend almost $1 trillion annually just on interest on the national debt, more than we spend on national defense or children. And all of this is only projected to get worse over the coming years.
We are at the point where Congress should reject any legislation that would increase our borrowing. In fact, if there were one fiscal pledge to ask of lawmakers, it would be No New Borrowing.
And yet the reconciliation budget bill making its way through Congress now would add not just millions or billions to the national debt, it would add trillions.
House Resolution 1, the One Big Beautiful Bill Act (OBBBA), would permanently extend the 2017 tax cuts that would otherwise expire at the end of this year; enact a grab-bag of new temporary tax cuts on tips, overtime and other priorities put forward by Congress and the president; increase spending for immigration and the border; and increase the debt ceiling by $4 trillion, all within the party-line reconciliation process.
More importantly, from a fiscal perspective, it would increase borrowing by $3 trillion over a decade, including interest costs, the result of $5.3 trillion of tax cuts and spending increases, $2.9 trillion of spending cuts and tax savings and over $560 billion of interest costs. While proponents have said the bill would produce economic growth and thus offset this debt increase, the effects are likely marginal and unlikely to reduce that $3 trillion significantly.
A price tag of $3 trillion added to the debt? That’s downright dangerous.
And if that weren’t bad enough, the bill includes various arbitrary expirations, similar to the 2017 tax cuts, that will force Congress to deal with them in just a few years and perhaps change the $3 trillion figure to something closer to $5 trillion.
What’s more, we’re seeing more and more evidence that markets will simply not absorb this new borrowing without a high price. The yield on ten-year Treasuries, the government’s most frequently used bond, rose last month from 3.9% to 4.6% within days. That, combined with a third of our debt rolling over to higher rates in the next 12 months, is cause for serious concern.
The ratings agency Moody’s apparently agrees, having downgraded the U.S. government from its highest AAA rating last month amid the debate over ing the reconciliation bill. As government borrowing costs rise, they flow through to the rest of the economy, making life more expensive for everyday Americans and businesses that rely on the ability to borrow to invest and grow the economy.
We’ve heard a wide array of excuses for why Congress needs to this bill, but none of them hold up under scrutiny. Some claim the bill will produce so much economic growth that it will pay for itself, but that wasn’t the case with the 2017 tax cuts and it is not the case now.
No third-party modeler has looked at this bill and concluded it would produce nearly enough growth to offset that borrowing. They’ve also claimed the bill achieves historic savings in the form of spending cuts, but net of its spending increases, the House bill cuts less than 2% of spending over the next decade and less than 1% after ing for the higher interest spending from the borrowing.
And outside of this bill, we need to have a serious conversation about the two elephants in the room: Social Security and Medicare. These are the two largest items in the federal budget (along with interest on the debt) and face serious financial problems. Instead of promising to not touch them, our leaders should have an honest conversation on how to get them under control before the trust funds for the programs face insolvency.
For Social Security, we’re talking about just eight years until retirees face an across-the-board benefit cut of 21%. That’s $16,500 for the typical couple retiring in 2033. That’s an unacceptable outcome that doesn’t get any easier by ignoring it.
Ultimately, we need to both pay for new priorities and enact significant debt reduction to prevent us from running head-on into a fiscal disaster.
The “one big, beautiful bill” in its current form is not the right approach. But it’s not too late to change course. In fact, we desperately need to do so.
Maya MacGuineas is president of the Committee for a Responsible Federal Budget.