Did you know that the United States national debt is approaching $22 trillion? And that’s just the official tally. If you count all the unfunded future obligations related to Social Security and Medicare, that number could get as high as $70-80 trillion.
But what does the term “national debt” mean?
The national debt is the cumulative amount of every year’s annual budget deficit or surplus since we became a nation. When the government spends more than it brings in via tax revenue, this creates a budget deficit, and the government borrows the difference. Spending less than the tax revenue creates a surplus. Unfortunately, budget surpluses are few and far between. All those budget deficits add up to give us our national debt.
While our national debt has risen steadily, so has the U.S. gross domestic product. Let’s compare current debt levels to current GDP, and let’s use national debt held by the public, which excludes what the federal government basically owes itself. Debt held by the public just surpassed $16 trillion, which is 78% of GDP.
Is that a dangerous level?
Immediately after World War II, the U.S. debt-to-GDP ratio reached an all-time high of 106%, so our current level of 78% may not seem all that bad. However, with over $1 trillion annual deficits in our near future, projections indicate that by 2028 the debt-to-GDP ratio will be about 97%, and by 2050 it will be a whopping 160%.
Such a high debt figure can cause several long-term, negative consequences, including rising interest payments that crowd out government spending on other things like social programs and education.
It is with this backdrop that over 100 students, faculty and community members participated in an interactive event on the University of Denver campus on Oct. 29, 2018, called “The Debt Fixer.” The event was sponsored by the School of Accountancy and the Committee for a Responsible Federal Budget (“Committee”), a nonpartisan, nonprofit organization committed to educating the public on issues with significant fiscal policy impact—such as our rising national debt.
The participants worked in groups and used the “Debt Fixer”, an online tool developed by the Committee, to attempt to stabilize the debt to a reasonable level (70% of GDP) in the near term and bring the debt down to historical averages (40% of GDP) over the long term. Participants could choose between tax increases or spending cuts to one or many programs—e.g. Social Security, Education, National Defense, etc.—to accomplish this goal. Each group submitted their attempt to address the problem, and the decisions of all groups were reviewed at the end with the larger audience.
Feedback on the event was overwhelmingly positive. One student, Marissa Mortl, said, “I really enjoyed the interactive nature of the event. The activity we did helped put into perspective the severity of the problem and the challenges lawmakers face to come up with a solution.”
Another student, Freddy Zaato, commented, “’The Debt Fixer’ event for me went to further prove that if a group of people are determined to find common ground on issues, politically or socially, they always will. We proved this to be true, even though I know the reality of fixing the debt is not quite as simple.”
Special thanks to Tyler Evilsizer, current research director for the Committee, and Jason Pequet, former research director for the Committee, for hosting and running the event. They said this was one of the largest and most successful student events the Committee has ever sponsored. Thank you to everyone who participated!
For more information about the Committee and to learn about the Debt Fixer, visit http://www.crfb.org/debtfixer.