Recently released government projections estimate the national debt will grow by $21.2 trillion over the next 10 years – a 78% increase raising the debt to more than $48 trillion. As bad as that sounds, the Committee for a Responsible Federal Budget, a bipartisan group that advocates for fiscal restraint, would like you to know the news could have been worse.
That’s because last year, policymakers in Washington did something that they hadn’t done in a decade: they agreed to actually slow the growth of the debt. Congress passed a bipartisan bill and the Biden administration issued rules and regulations that, combined, have the potential to trim $1.3 trillion from the debt by 2033.
The Committee touted this achievement last month when it rolled out its updated Debt Thermometer, hailing 2023 as a “monumental year for fiscal policy.” Given that the year was also marked by the latest default-threatening standoff over the debt ceiling and a $1.7 trillion federal budget deficit – a record amount outside the two pandemic years, it’s difficult to dispute the assessment.
The two very large and seemingly incompatible numbers raise the question: How did we slow the rate at which the debt is growing at the same time that we added a record amount to the debt? It can be a bit confusing, as so many things are in discussions of federal fiscal policy. (See our problem brief on the debt for more insight.)
The two numbers are difficult to compare. They both tell us something about the debt, but the stories they tell are very different. One gives us a glimpse into how future debt trends are calculated, and the other is a snapshot of the amount added to the debt last year. It’s helpful to understand this difference so we are better able to see how they can co-exist.
The $1.3 trillion is a projected reduction in the debt over the next decade and is based on last year’s analyses by the Congressional Budget Office, the nonpartisan agency established to help Congress understand the economic implications of its policymaking. Early in 2023, CBO estimated that, in the absence of any policy changes, the debt would increase by $20.3 trillion over the next 10 years. But after analyzing the law enacted last June that suspended the debt ceiling until 2025, the agency predicted that carrying out all its provisions would trim the need for additional borrowing to $18.8 trillion – a difference of $1.5 trillion.
CBO also estimated that changes to Medicare Advantage reimbursement rules issued by the administration last year would shave another $100 billion from the debt over a decade. But because other laws and executive actions that took effect in 2023 are expected to add $349 billion to the debt in that time, the bottom line is the debt in 10 years is projected to be $1.3 trillion less than it would have been had none of those policies been enacted.
The other number, the $1.7 trillion, is much simpler to understand. It is the amount the Treasury had to borrow in 2023 to cover the deficit – which is the difference, calculated annually, between everything the government spends and all the taxes and other revenue it takes in.
Still, in the context of a national debt that is now $27 trillion (following the CBO analysis, we are referring to public debt, not total debt) and steadily rising, the projected reduction – which amounts to less than 3% of the debt projected in 2034 – seems a bit like tossing a fistful of sand into a hole that we are still digging ever deeper.
Public v. Total Debt
Economists who study the debt tend to focus on what’s commonly called public debt, while politicians and most of the news media usually concentrate on total debt.
Public debt, also called net debt, refers to the amount the federal government borrows from third parties, typically by selling US Treasury bonds to mutual funds and pensions as well as foreign governments, state and local governments, and others. Public debt as of 2023 was $26.2 trillion; it is projected to increase to $48.3 trillion by 2034.
Total debt, also called gross debt, includes public debt plus what the federal government borrows itself, like the Social Security Trust Funds. Gross debt at the end of 2023 was $33 trillion; it is projected to increase to $54 trillion. The debt ceiling, established by law, refers to the country’s total debt.
To counter the paralyzing hopelessness that the size of the debt can evoke, Mike Murphy, senior vice president at the Committee for a Responsible Federal Budget, offered a more productive perspective that emphasizes a fiscal goal that may be more attainable than balancing budgets and lowering the actual amount of debt.
“The goal is to stabilize the debt trajectory,” he explained, a reluctant acknowledgement that reducing the growth of the debt, rather than reducing the debt itself, is the best near-term fiscal target. Angling his hand to indicate a steep upward path, he continued, “The debt is going up right now, but what you want to do is bend it and stabilize it.” As he makes this last assertion, his hand flattens horizontally.
To stabilize the debt, according to a Committee analysis, our elected representatives in Congress and the White House would need to agree on a combination of spending cuts and tax increases that would slow the growth of the debt by an additional $8 trillion over the next 10 years. Should policymakers achieve that target, debt as a percentage of GDP would be the same in 2034 as it is today.
An $8 trillion reduction is more than six times the amount achieved last year – a giant leap forward, especially given that it took the presence of radicals in Congress to threaten to allow the country to default on its repayment obligations to get last year’s savings. While a dangerous minority in the country may have thrived on the political drama, most voters and elected officials agree it is no way to govern.
Nonetheless, in the Committee’s view, last year’s policymaking produced a noteworthy breakthrough that is deserving of recognition, if only to encourage policymakers to generate more of the same. Or at the very least, considering recent history, to not undo their work.
The likelihood that the legislated reductions will be realized is slim. Almost all the projected savings rely on Congress for 10 consecutive years abiding by the latest defense and domestic discretionary spending limits that it set for itself. Over the last several decades, similar congressional efforts to curtail spending have failed as the next Congress either has modified or suspended such limits.
The latest CBO baseline analysis, released this month, makes clear the risks if our representatives in Washington fail to take the next step. The agency forecast that, without any policy changes, the debt will reach a record 116% of GDP in 2034. It could be even higher if some policies that are set to expire, like the 2017 tax cuts, are extended.
Murphy acknowledged that it’s rare for Congresses and presidents to make progress on the debt and when they do, it’s easy for them to backtrack. The Committee’s hope is that its Debt Thermometer, by focusing on the net fiscal impact of the votes of our elected representatives, might hold them more accountable, especially when they get it right.
Referring to their 2023 breakthrough, Murphy said, “The fact that they’ve gone from adding to the debt on net to this being the first year the resulting actions of the policies improve it, we feel is an important turning point. We want to draw attention to it.”
Who are the Fiscally Responsible?
The debt ceiling bill passed with strong bipartisan support in both houses of Congress and was titled the Fiscal Responsibility Act – a name that suggests that our representatives in Congress are fiscally responsible. In fact, it was a rare instance where a majority of them voted responsibly in their oversight of the country’s fiscal health. Such votes are not easily decided. Those who voted on the bill each had their own reasons for their “yea” or “nay” vote, as this report from West Virginia suggests.
You can learn how your senators and representatives voted from the House roll call vote and the Senate roll call vote.
Fixing Our National Debt Means Clarifying Our Priorities
The country’s soaring national debt is not just a testament to our lack of fiscal responsibility but also a reflection of our loss of national identity. Fixing the debt problem so that it no longer threatens a national economic crisis is an opportunity to reassess our priorities and reassert who we want to be as a nation.
Author: George Linzer
Published: February 16, 2024
Feature image: Oleksandr Hruts on iStock (modified)
Sources
The URLs included with the sources below were good links when we published. However, as third party websites are updated over time, some links may be broken. We do not update these broken links. If you are interested in the source, it may be possible to find it by copying and pasting the URL into a search on the Internet Archive Wayback Machine. From the search results, be sure to choose a date from around the time our article was published.
Interview with Mike Murphy, January 31, 2024
Mike Murphy, email with clarifications, February 5, 2024
Congressional Budget Office, “The Budget and Economic Outlook: 2024 to 2034”, Feb 2024, https://www.cbo.gov/system/files/2024-02/59710-Outlook-2024.pdf, accessed Feb 7, 2024
Committee for a Responsible Federal Budget, “Building Upon a Good Year for Fiscal Policy”, email Jan 24, 2024
Bipartisan Policy Center, January 11, 2024, https://bipartisanpolicy.org/report/deficit-tracker/, accessed Jan 30, 2024
Congressional Budget Office, “How the Fiscal Responsibility Act of 2023 Affects CBO’s Projections of Federal Debt”, Jun 2023, https://www.cbo.gov/publication/59260, accessed Jan 30, 2024
Committee for a Responsible Federal Budget, “Introducing the CRFB Debt Thermometer”, Oct 26, 2023, https://www.crfb.org/blogs/introducing-crfb-debt-thermometer, accessed Jan 30, 2024
Committee for a Responsible Federal Budget, “What Would It Take To Fix the Debt?”, Feb 13, 2024, https://www.crfb.org/blogs/what-would-it-take-fix-debt, accessed Feb 15, 2024
Ballotpedia, “Fiscal Responsibility Act of 2023”, https://ballotpedia.org/Fiscal_Responsibility_Act_of_2023, accessed Feb 8, 2024
Jean Folger, “Sequestration: What It is, How It Works, Exemptions”, Investopedia, May 30, 2023, https://www.investopedia.com/terms/s/sequestration.asp, accessed Feb 8, 2024
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