A New Speaker Isn’t Going to Magically Fix the National Debt

Fiscal stability depends on addressing Medicare and Social Security.

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(via Getty Images)

Last week, eight House Republicans joined every House Democrat in voting to remove Kevin McCarthy from the speaker’s office. While the reasons for these Republicans choosing to remove one of their own may vary, all have referenced the United States’ $33–trillion-and-growing national debt as part of their calculus.  

These lawmakers are right that our rising debt and deficits are unsustainable. According to the latest forecast from the nonpartisan Congressional Budget Office, debt held by the public will rise steadily from 97 percent of GDP in 2022 to 115 percent in 2033—the highest level on record. Since that forecast was made in June, interest rates on the debt have soared, pointing to a deteriorating fiscal outlook. And while history will be the judge of the 118th Congress’ spending record, the present day demands solutions, not theatrics.  

If House Republicans are truly serious about tackling the national debt, there are a number of steps they must demand of themselves and the next speaker.

To begin, they must acknowledge that so long as we have divided government, compromise remains the only path to a budgetary solution. Structures should be put in place to facilitate sensible compromise rather than political theater. That means establishing a bipartisan commission, with assistance from outside experts, to set specific, tangible, and attainable targets. Balancing a budget in 10 years is admirable, but a more realistic and sustainable goal would be to stabilize debt as a share of GDP at or below current levels. 

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  1. Avatar photo
    Ben Connelly

    Yeah it really makes you wish FDR hadn’t sold social security to the American people on a lie in the first place.

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    Rajeev

    The fact that defense budget is not included in the article is either a major accidental oversight or a signal that the author is not serious in balancing the budget. Any realistic proposal would have to have a complete reform of defense contractors and the amount of money spent that is completely antithetical toward best national security practices.

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    Rajeev

    Simpson-Bowles was the right approach not just for the specifics but more for the general methodology. People like Dick Durbin voted for it even though he hated many of its contents. Same with Kent Conrad who thought many aspects of it would hurt rural communities.

    However, there is no attempt anymore by Republicans to vote to cut something that is liked only to vote to cut the Democrat’s priorities. As long as there are people like Paul Ryan (who voted against Simpson-Bowles) that have no sense of fiscal responsibility, there can’t be any legislation to address the deficit much the less the debt.

    For any proposal to make sense, the Tax Act of 2018 has to be rolled back significantly. The corporate tax rate needs to go back up a few percentage points to around 24-25% still massively below the pre-bill corporate tax rates. All entitlements have to be on the table and most importantly, defense spending has to be included. The defense department is so bloated that strategic cuts could actually help military readiness by eliminating so much of the bureaucracy.

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    Phil

    It will take a lot of work and compromise to come to a solution on the deficit and debt, sell it to the voters and implement it. Revenues will have to increase somehow and expenditures will have to decrease . Everyone should be asked to pitch in and help from Elon to regular people. But it will need to be a shared burden where everyone is asked to sacrifice. For instance, while I wouldn't be happy to have my Social Security benefits cut (but I can see the necessity), I'll be really unhappy if my benefits were cut and then in turn see that the rich and businesses have their taxes cut. At the same time, I and no one else, wants to pay more in taxes and see it wasted on frivolous expenditures and programs that cost a lot and produce little benefit. Figuring out how to do this won't be easy and I don't see it happening given the situation in the world and Washington today. There might be some fiddling around the edges--Republicans will kick people off of Medicaid , SNAP and other programs and Democrats might be able to raise taxes slightly here and there but none of that will significantly affect the deficit/debt.

    Most people, including myself, don't understand the Federal budget and the main drivers of the deficit. The guy across the street from me thinks that the deficit can be eliminated simply by stopping aid to Ukraine which he says is all stolen anyhow. When I mentioned that aid to Ukraine was a very tiny part of the federal budget and that if he was really interested in reducing the deficit, he and everyone else would have to pay more in taxes and take home less in Social Security and Medicare benefits along with other things. He said he wasn't interested in doing that.

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      Ben Connelly

      Honestly, we could probably do it without cutting current Social Security benefits if we were willing to implement drastic future cuts for younger workers (under 50 or under 40). I’m guessing it would need to be a sliding scale so that it’s “fair” to mid-career workers. I’m in my late 20s and I’d be totally fine with my entire generation getting zero benefits (although I bet many of my peers would prefer to get something). If we were looking that far in the future, we could implement drastic changes (privatize, make SS more like a 401k, abolish it completely, raise retirement age to 75, whatever) while giving the workers who will be affected by it (me) time to prepare.

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    George.Skinner

    I don’t think there’ll be a more realistic perspective on spending, deficits, and debt so long as most people think that spending can be borne by somebody else. The top quintile of income pays for 90% of all government transfers. We’re not going to shift that burden significantly towards the bottom 40%, making less than $50,000 per year. Still, I think the problem is that most people aren’t paying enough to really feel the burden of the spending. There’s good reason to have a progressive tax system, but I think a necessary condition is that everybody feels the pinch as well.

    A related problem is the notion is that it’s possible to merely cut the spending that doesn’t affect them personally. There’s a couple of generations of misinformation regarding the funding of social security that leads people to think they’ve already paid for what they’re getting (nope.) There’s also the self-centered assumption that only their priorities are worthy, failing to understand the horse-trading implicit in government.

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    1. Jack H Wolf

      Spending can be borne by the people who are making historically high unprecedented amounts of money- why not. Does Musk really need to make 10B a year (calculation 5% average stock market yield on 260B wealth and 30% taxes). Is his life going to be made that miserable if the 10B after tax goes down to 9B that you want to take it from the middle class which would come out to an extra $1000 from 1 million people. Is the imposition of 1 person making an extra B worth taking $1000 from 1 million people. I am a utilitarian. Do what causes the least pain and most happiness and that is a no brainer. Now there might reach a point where he would just move to Monaco but we are a long way off from that and the top quintile have been outpacing everybody else for 40 years.
      I dont care what percent of taxes is borne by whom as long as after tax income doesn't keep going more and more disproportionately to the top which it has been doing . Post WW2 was the biggest expansion of income to the middle class but it changed around the time of Reagan and has been going the other way since. I have no problem with hard working rich people getting rich, but there is increasing your wealth vs taking up most of all the increased wealth . I like to see all boats rise equally. t makes for a happier country. That means the rich stay rich, but they dont get increasingly richer than everybody else, and with more money than they can ever spend where it is just a numbers game.

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    3. AJLiberty

      Amen. As long as compromise is seen as a dirty word and the priorities of the other 50% of Americans are seen as illegitimate, nothing changes. Our politics is toxic and no credit is given for broaching hard truths and making tough tradeoffs. Politicians are incentivized to think short term and be ideological. It's not about service; it's about vanity and hanging on (for many).

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  7. Midramsey

    The statutory entitlements constitute half of the total expenditures more or less so saying they shouldn’t be touched is not a serious position. There are all kinds of ideas about program adjustments and taxes which can be debated but the can is down the road and the runway is getting shorter.

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    1. Jack H Wolf

      The most serious solution has to account for political reality, as conservative ideologues have sung the tune of reducing benefits forever and nobody is buying.
      It is not that I dont favor eg increasing age eligibility but without giving something that liberals and voters like. With Donald Trump campaigning that he wont touch SS, it is not like Rand Paul is going to be elected or that conservative purists are going to assume governance.
      It is a mathematical falsehood that it could not be fixed short of cuts, in that the same reduction in debt would come from increasing the threshold for not collecting SS tax, currently at 160K or increasing the actual tax, or any other revenue side of the equation. There may be reasons not to do this, but to act as if raising revenue does not accomplish the same thing that decreasing expenditures does, is just not proper accounting.
      No 60 Senators are going to support a simple increase in SS age eligibility - no Dems and probably not half the Rs, unless coupled with something eg decrease Mcr to 60 or increase the revenue by increasing SS taxes (likely increasing the high income threshold from the current).

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      1. Midramsey

        There are a number of adjustments that should be considered: raise the normal retirement age, raise the SS tax, lift the income cap, change the COLA calculation. Little adjustments in all of those ideas could make the program viable for the foreseeable future. I’m a traditional conservative who believes in sensible solutions.

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        1. Jack H Wolf

          I am a centrist conservative Democrat and agree with you and commend you for including "raise the SS tax" or "lift the income cap" that is the revenue side of it as the author here seems to only be putting the decreased expenditures on the table. I would support a compromise which would include increasing age eligibility but I doubt it is politically doable.

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          1. Midramsey

            Thanks for your comments. I didn’t read the article the way you did. The author stressed compromise and bipartisanship as the approach needed and that will mean both sides will have to do things they don’t like. Now as a general rule I think we have more of a spending problem than a tax problem.

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          2. David R

            The "income cap" is an accounting fiction that only exists if you pretend "payroll tax" and "income tax" are separate things. You may have noticed that income tax rates go way up approximately right after the payroll tax cap is crossed.

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  8. Jack H Wolf

    "so long as we have divided government, compromise remains the only path to a budgetary solution. "
    This is true but the prescriptions offered by Mr. McBride ie lowering expenditures for Medicare and Social Security, besides being politically DOA, even Donald Trump the current owner of the GOP is consistent in no cuts to Medicare, come with nothing that liberals would support not to mention GOP wanting re election.
    The obvious second part of reducing debt, increasing taxes is addressed with "Tax hikes on income and business investment cost jobs and comparative advantages for business. They also weaken the federal government’s tax base and its ability to pay down debt over the long term. "
    Consumption taxes are regressive, given that poorer people consume much more of their income than richer people.
    I do not know that income taxes reduce investment. Investment is not taxed but is expensed. Indeed, the fact is that people who park their assets in the stock market pay less tax from their investment than those who use the money to start businesses because capital gains is taxed at a lower rate.
    My first goal would not be to attack Medicare and SS which is not a compromise but a GOP talking point and political impossibility, but to tax capital gains as income. That might actually spur business formation, b/c un der the current system, business is taxed at a higher rate than just living off of the stock market.

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    1. Dustin M

      I've been wondering for quite awhile what even a 1% capital gains tax owed to social security and Medicare (with no cap) would do for offsetting the deficits... capital gains seems like the biggest no-brainer place to look where a small piece of added tax revenue to SS and Medicare could make a huge difference. In theory this should be doable even if capital gains are kept separate from earned income.

      The big feature of consumption taxes is that the wealthy can't dodge them. For that reason alone I think they are worth considering, because it's either that, resign to the fact that there will always be hidden untaxed income among the wealthy, or trust congress to play whack-a-mole with all the tax-avoidance loopholes. I think it should be possible to make it non-regressive on balance if there are exceptions for basic necessities like food and medicine, as well as other tax breaks targeting the lower and middle class funded by the added consumption tax revenue. For example, another progressive change would be to decrease the 6.2% rate by a bit (thus providing some middle class relief) in exchange for removing the income cap altogether (offsetting the lost revenue of said relief via more revenue from the ultra wealthy), and/or add some brackets to SS/Medicare taxes.

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      1. Jack H Wolf

        Yes Capital gains to SS would bring in a lot.
        Even with food and medicine consumption taxes I think would still be regressive. Elon Musk if he makes an average 5% on his wealth which is mostly in stocks makes about 13B a year and no way he spends anywhere near that in 1000 lifetimes so his income would be mostly tax free Now luxury taxes are a consideration for being progressive but in the past they were nixed by eg the yacht manufacturers. Estate taxes would also be progressive.
        I agree on decreasing the payroll taxes for both employees and employers. For employees it is regressive. And having been an employer, I dont see it is helpful to be taxed for giving somebody work which is a negative incentive to hiring. Suppose I could buy a machine to replace them and then pay no taxes on the machine.
        Mcr currently and SS in the near future are largely funded by the treasury so the idea of the payroll taxes covering it is not accurate and maybe just admit to that.
        None the less I tend to be conservative, and dont believe that huge changes in structure always work for the best- Chesterton fence and all. Like the people who want to go to all out consumption tax as a magic bullet, but everything is complicated, and a VAT type European thing has plenty of problems with encouraging black markets and the cheaters will always figure an angle and then government counters it with more layers of complication, so the idea that there is this simple easy total change over, I dont believe and a national sales tax of VAT would not be as simple as some believe.

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  9. AJLiberty

    It's sad but the only bipartisan agreement is to keep spending like drunken sailors...while feebly pointing the finger at the other side.

    The nasty truth is that buying votes works and austerity is a tough sell. Whether it is the GOP spending more on the military and border security or cutting taxes across the board or the Democrats forgiving student loans or advocating for free college, politicians are compelled to bring home the bacon. There is no institutional discipline where exploding deficit levels initiate automatic cuts, benefit reductions, or tax increases.

    Politicians can just continue to blame the poltical divide....and use that excuse to fund raise to keep their cushy jobs. You see, the other side is keeping them from doing what needs to be done...apparently. The media, which should be the watchdog, enables the partisan food fight. It doesn't seek to pull us together and create oxygen for moderates to create compromise, it thrives on feeding the partisan divide. Social media misinformation and emotionalism lets us act like children with little consequence. Compromise is cooked before it can gain any traction.

    Before a Simpsom-Bowles approach can see the light of day, there needs to be an incentive to enact it. Most people see no urgency. Deficit hawks are painted as chicken littles. The sky isn't falling until it is. The GOP is brashly supporting the return of the least serious politician ever, with wannabe's rising up left and right. The DEMs can't find anyone under 80 that can lead and doesn't have the political will to even dump an unpopular VP. The situation would be comical if it wasn't so depressing.

    In the quest to give everyone a "voice", we've muted our most responsible and thoughtful voices. Hard truths are lost in the cacophany of banality. Joe Rogan has replaced George Will as an influencer. AOC has supplanted the economic truth telling of Patrick Monahan. MTG rises while Mitt Romney fades into the sunset. Matt Gaetz drives the narrative while Ben Sasse and Paul Ryan slink off to academia and other less odious pursuits. Good minds like Mitch Daniel are too boring for us.

    Cultivating the environment for compromise needs to be a priority. I fear it will take a crisis to get us there....

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    1. Jack H Wolf

      No, spending is not the complete cause, this is just the right talking point. Debt is revenue minus expenditures and either side of that calculation is as important as the other. The Nordics with much higher tax burdens and stronger social welfare have much lower debt/gdp ratios than the US which except for Italy, Japan, Greece, and Portugal has a higher debt ratio than the OECD countries.

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        DougAz

        You're right on target. Probably 70% of Income or GDP doesn't contribute to FICA or Medicare.

        Revenue is the most underused component to fiscal stability.

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        1. AJLiberty

          Why do I cynically suspect that does NOT include your taxes going up

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            DougAz

            Well, your cynicism misleads. I'm 69 + and pay taxes. Paid quite a bit over my long working career

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    CynthiaW

    "These lawmakers are right that our rising debt and deficits are unsustainable."

    Begs the question.

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      Kmregan7

      Been hearing it for decades
      And then republicans don’t put their money where their mouth is (so to speak) in favor of tax cuts and more tax cuts, mostly for the ultra wealthy
      What needs to happen is a good combination
      Medicare reform, tax code reform, tax hikes, cuts in defense, etc.

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        CynthiaW

        "Been hearing it for decades."

        Which is why the assertion begs the question. If it's "unsustainable," why is it continuing? What event(s) will turn the situation from tautologically "sustainable" to "Whoops, that went badly ..."?

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        1. Jack H Wolf

          It is continuing because although both parties talk about debt, the Rs prioritize tax cuts and the Ds spending and both equally cause debt.
          The most successful governments in reducing debt were during the Clinton years with a D president and an R Congress. When the Rs have the trifecta as in 2017-2019 they no longer care about Debt and just lower taxes and so we had the greatest increase in debt during a period of a strong economy.
          When the Ds have the Trifecta they just go on a spending spree and if not for Manchin if BBB had passed we would have had an even bigger bump in debt.
          The problem is that debt stimulates the economy and politicians love an expanding economy. Throwing out money stimulates spending which increases gdp, and it is equal whether it comes from tax cuts or social spending.. Trump still benefits from his good economy but a lot of that was about deficit spending.

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          1. Nordic_man

            Deficits have gone down consistently during most Democratic administrations. So....are you mad about the spending in it's own right or the deficit?

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