The federal government is set to add another $1.5 trillion to the national debt this year. To put this in perspective, note that one trillion is a thousand billion. A billion seconds is roughly 32 years – thus, a trillion seconds is 32,000 years. The national debt currently stands at $34 trillion. Counting to $34 trillion, assuming each number took one second to count, would take roughly one million years. The Great Lakes were not even formed yet one million years ago! The debt-to-GDP ratio is now at 120% – what it was during World War II. This is an unfathomable amount of debt.
The federal budget was last balanced in 2001. What would it take to balance it again? The options are not good. Consider federal spending in 2022. The federal government spent $1.2 trillion on Social Security, $1 trillion on defense and the Veterans Administration, $750 billion on Medicare, $600 billion on welfare, $500 billion paying interest on the national debt, $1.2 trillion on transfers to the 50 states for things like education and Medicaid, and $1.2 trillion on everything else the government does. In 2024, interest payments on the national debt are set to double given the increase in interest rates since 2022.
To finance this spending, the government collected $2.6 trillion in individual income taxes, $1.5 trillion in payroll taxes, $400 billion in corporate income taxes, $100 billion in tariffs, $88 billion in federal sales taxes such as the federal gasoline tax and $300 billion in other taxes. This resulted in a $1.5 trillion deficit that was added to the national debt. Note that for as much attention as they get, corporate taxes and tariffs are not a significant source of federal revenue.
Consider what it would take to balance the budget. Doing so through tax increases alone would require doubling the payroll tax, or a 50% increase in income taxes across the board. “Taxing the rich” is nowhere near sufficient to achieve budgetary balance. Such a massive tax increase would lead to political unrest, a severe recession and widespread tax avoidance that would result in less tax revenue than anticipated collected and thus, the budget not being balanced.
In terms of cutting spending, the government could end all Social Security payments or end all military spending and the budget still would not balance. The government could eliminate everything it does except pay for entitlements, defense, interest on the debt, and still not balance the budget without finding a few hundred billion dollars in cuts somewhere else. This would mean no transportation, no national parks, etc. Life would grind to a halt, at least in the short term.
Balancing the budget requires a bipartisan, long-term plan consisting of a combination of spending cuts and tax increases, which is unlikely achievable, given our political divide. Unsustainable debt has sunk more than one country. The longer the U.S. goes without getting its fiscal house in order, the greater the risk that it will sink ours, too.
