Even before COVID-19 hit, the United States entered the new decade with a $23.2 trillion national debt. It now stands at $24.5 trillion, according to Treasury Direct, and will certainly increase even more as economic relief efforts to deal with the fallout from the coronavirus are unveiled.
Just like in our personal finances, debt is not necessarily a bad thing. The ability to borrow money quickly can be useful in times of crisis, such as now with COVID-19. However, if the debt becomes too high and sustained for too long, the country risks falling outside the capacity to pay it back.
As such, it’s important to understand how the U.S. got here and what policy changes need to be made moving forward to get the national debt back to a more reasonable level.
According to the Heritage Foundation, the “decade of debt” in the 2010s actually began at the end of the previous decade, with the Great Recession of 2008 and the government’s recovery efforts that followed in 2009.
Conservatives argued that the Obama administration’s stimulus plan increased government spending and the national debt without revitalizing the economy. The Tea Party movement was born out of these frustrations.
When Republicans gained control of Congress in 2010, they aimed to reduce the debt by decreasing government spending with the Budget Control Act of 2011. However, the program failed to distinguish between essential and non-essential spending. As a result, many programs were re-classified, which resulted in a smaller spending reduction than lawmakers hoped for.
Things continued in that mode through Donald Trump’s election in 2016. Fiscal conservatives like then-Speaker of the House Paul Ryan saw a Republican in the White House as an opportunity to advance stricter deficit reduction measures, but they quickly found themselves at odds with Trump over issues like immigration.
In the end, Trump’s 2018 and 2019 budget deals with Senate Majority Leader Chuck Schumer and Speaker of the House Nancy Pelosi ended up increasing the government’s spending power, driving up the debt even more.
Even before COVID-19 hit, the deficit was expected to stay above $1 trillion through the end of the 2020s, a rate the Heritage Foundation called “especially unconscionable” amid record-low unemployment before the virus shuttered the economy.
At the beginning of the year, the Heritage Foundation released a “Blueprint for Balance” that was aimed at reducing the national debt throughout the decade by cutting government spending, reforming Medicare and Social Security, and making the Trump administration’s tax cuts permanent to encourage sustained economic growth.
Given the uncertainty in the economy right now, it’s unclear when the government will be able to enact — or even consider — a plan like this.
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