Debt and Tax Cuts

Chart 1 Center for American Progress

Federal debt is in the news. There were many headlines last week about the debt exceeding $40 trillion and now being bigger than the economy. There were also headlines about rising interest rates on long-term debt and the showy, ineffectual attempt of Scott Bessent, the Treasury secretary, to manipulate them down.

Some of this is hype. Properly measured, debt is “only” $32 trillion. The comparison with GDP involves apples and oranges. And as I argued the other day, rising rates do not signal an imminent fiscal crisis.

Yet the debt is indeed very large and some concern is warranted. In the next installment of this series, I will address policy recommendations for a future Democratic administration to address the debt. I say a Democratic administration because Republicans will deny that there is a debt problem as long as they hold the White House.

But first we need to ask the question of how we got here. JD Vance says that it’s Joe Biden’s fault, because of course he does. Many others blame either reckless public spending or the fiscal burden of an aging population.

The reality, however, is that U.S. debt would be much lower as a percentage of GDP, and would barely be in the news at all, without the revenue loss from tax cuts enacted by Republican presidents: George W. Bush in the 2000s, then Donald Trump during both of his terms.

Today’s primer will examine the causes of high current U.S. debt. Beyond the paywall I will discuss the following:

1. U.S. spending, taxes and debt in historical and international perspective

2. What happened to the Clinton surplus?

3. Population aging and “entitlements”

4. Tax cuts and revenue