NOVEMBER 2011 |
Savings, Solvency, and the American Promise
Figure 1. A “lost decade” o decits uels a surge in America’s national debt
($) 108640PUBLICLY HELD FEDERAL DEBT ($T)
Actual debt 2000–2011$10.2 trillionCBO projected debt-$2.3 trillion
(CBO, January 2001)
Source: Pew analysis o Congressional Budget Oce (2001–2011) data.
What happened? History took us by surprise. Insteado big surpluses, we had a decade o decits, liting thenational debt held by the public to over $10 trillion by2011, $12.5 billion more than the CBO had projected atthe start o the new century. There were multiple causesor that, including:
Tax cuts under both Presidents Bush and Obama
9/11, the wars in Aghanistan and Iraq, and other new deense costs
Major new spending on discretionary programs
A new drug entitlement program or seniors
Massive stimulus spending to try to end of another depression ater the crash o 2008
But the single most damaging cause o these decits,shown here in red and accounting or more than aquarter o total decits — twice as much as the Bushtax cuts — was the lower revenue ows caused byslower economic growth, which was well below what theCBO had projected. In other words, economic growth, orthe lack o it, is the most powerul variable in America’sscal health.
Today, ederal decits already claim a large share oour economy, much more than that claimed by top-rated peers like the United Kingdom, France, Canada,Australia, and Germany. Our total national debt — andthis includes internal government debt like the SocialSecurity trust unds — is on track to reach $15 trillionby the end o this year. Fiteen trillion dollars is a mind-boggling number and dicult to imagine.
The single most damaging cause o these deicits … was the lower revenue lows caused byslower economic growth … In other words, economic growth, or the lack o it, is the mostpowerul variable in America’s iscal health.