The last time the federal government ran a surplus was from 1998 to 2001, and our current debt as a percentage of the economy is rising, now almost as high as it’s ever been. If this trend continues, the debt will reach 200% of our GDP in 30 years.
This was among the dilemmas discussed during a January 19, 2024 panel discussion, Fiscal Challenges Facing the Next Administration, hosted by the Warren B. Rudman Center for Justice, Leadership & Public Service.
The speakers were Bob Bixby, Executive Director of the Concord Coalition, Rachel Snyderman, Director of Economic Policy at the Bipartisan Policy Center. Laura Knoy, the Center’s Community Engagement Director and Interim Director, moderated the discussion. Visit here for a video of the event.
In preparation for the New Hampshire presidential primary, which was held on January 23, the discussion centered around the nation’s current fiscal situation, the challenges the next president will face, and the importance of informing citizens about those challenges. Following the moderated discussion, the speakers took questions from the audience.
The speakers highlighted that the current situation – with increasing national deficits and growing debt – is unprecedented in a time of economic strength. “We’re not at war, not in a time of economic downturn,” said Snyderman, and yet we are faced with imminent Social Security insolvency, growing healthcare costs, and programs spending more than we bring in in revenue. Another major challenge: growing interest on the debt.
“I can’t tell you when it will result in some sort of crisis, or if it is going to result in some sort of crisis,” Bixby said. “But I do know it’s a very risky path that we’re on.”
For the next president, Snyderman said, “fiscal policy is on the agenda, day one."
The current polarized political climate can make the problem seem insurmountable. But despite the difficulty in agreeing on what to do, there is reason for optimism, Snyderman and Bixby agreed.
“We know that the solutions are out there,” Snyderman said. “It’s just that we have to find the political courage to be able to address them.”
Solutions, Bixby and Snyderman agreed, include both increasing taxes and cutting spending, and reforming the immigration system to strengthen our workforce and tax base, since shifting demographics mean we have fewer and fewer working-age people.
Bixby said healthcare reform is also key -- finding a way to deliver healthcare more efficiently. And he pointed out ways to raise revenue without raising tax rates.
“There are a lot of things called tax expenditures in the code: exemptions, deductions, exclusion, special rates,” he said. “That’s where we can get some real revenue. And you can do it on a progressive basis by closing some of those things. That would be the preferred way to go. It’s called broadening the base and lowering the base. That’s the economically efficient way to do it.”
Bixby and Snyderman agreed that it’s important to act now so that we can phase in changes ahead of time to prevent big, shocking automatic cuts to programs such as Social Security.
And they highlighted some myths that might come up on the campaign trail, presented as “silver bullets”:
- Not touching Social Security or Medicare. Unfortunately, these programs are spending more than they bring in, so we need changes in their structure so that they will be around for future generations.
- Cutting waste, fraud, and abuse. There is no line item for this, it’s subjective. Even if we could agree, there’s not enough waste, fraud, and abuse to make a big dent in the deficit.
- Cut foreign aid. Foreign aid takes up only 1% of the federal budget, and so this, too, is not a significant enough change to really affect our bottom line. As Bixby joked: “It’s like the old saying, ‘don’t tax you, don’t tax me, tax the guy behind the tree.’”
- Grow our way out of it. Both parties have tried to do this with either investments or tax cuts, but we would need an implausible growth rate, and our current demographics just don’t allow for the kind of workforce growth we would need for this to work.
If Biden and Trump are on the ticket in November, Bixby said, we should expect that their fiscal policies will continue as we know them, with Trump attempting to preserve his tax cuts and Biden trying to protect the Inflation Reduction Act and his infrastructure package.
There is new hope in the idea of a fiscal commission, which seems popular in Congress right now. A commission would provide a menu of options to help lawmakers decide how to compromise. However, for any real change, Bixby and Snyderman agreed, officials need to see that Americans are willing to make changes in order to fix this problem.