The U.S. federal debt has officially exceeded $39 trillion for the first time, meaning the government now owes more money than the entire U.S. economy produces in a year. As of March, the economy's gross domestic product was about $31 trillion, while the debt held by the public was roughly $49 billion larger. This is the first time since just after World War II - except for a brief pandemic dip - that the debt has topped 100% of GDP. Fiscal watchdog Maya MacGuineas of the Committee for a Responsible Federal Budget called the milestone a flashing red warning light, noting that if it gets people to pull their heads out of the sand, that might be a good thing. "A hundred percent is going to make you stop for a second, at least, and think, is this really healthy for the economy? And the unequivocal answer is no," she said.
The debt as a share of the economy has more than doubled in the last two decades, and it's projected to keep growing. The simple reason: the government spends considerably more than it collects in taxes. Last year, for example, the government ran a $1.6 trillion deficit during a time of "relative peace and prosperity." Most federal spending is on autopilot, and it's only going to increase as more people retire and need costly healthcare. Meanwhile, Republicans passed another big tax cut, and MacGuineas noted that mounting debt has been a bipartisan problem. "We have two parties who are always trying to outbid each other by giving away more, both spending and tax cuts," she said. "The fiscal pander has become the default political move these days."
What are the downsides? Interest on the federal debt is now over a trillion dollars a year - more than we spend on defense, Medicare, or anything except Social Security. That means Congress has to come up with over a trillion annually just to cover old debts before filling a single pothole or buying a new Navy ship. High government borrowing also makes it more expensive for everyone else to get a loan, buy a house, or build a business. And it leaves the government less room to maneuver in a crisis like war or a deep recession.
As for solutions, fiscal experts say we don't have to fill the hole, but we do need to stop digging. That means taxes need to go up and spending needs to come down - and no, simply taxing billionaires, printing money, or weeding out waste won't cut it. MacGuineas says it will require sacrifice from everyone. "This is not one of those situations where you can just say, yes, let somebody else fix this problem," she said. "It took decades to get this deep in the hole." There's no shortage of policy ideas - just a chronic lack of political will.