National Debt: Who Cares?
The U.S. national debt is massive – so massive that most Americans cannot comprehend it, much less solve it. But a crisis is looming, and a day of reckoning that will affect every American is coming. The Manhattan Institute’s Brian Riedl explains how we got here and what you can do about it.
The national debt currently stands at _____________________________.
22 thousand dollars22 million dollars22 billion dollars22 trillion dollarsAccording to data from the Congressional Budget Office, how big a shortfall is projected for Social Security and Medicare over the next three decades?
25 trillion dollars50 trillion dollars75 trillion dollars100 trillion dollars74 million Baby Boomers are rolling into retirement age – 10,000 a day.
TrueFalseHow much in benefits do current Medicare recipients typically receive?
About as much as they paid into the programTwice as much as they paid into the programThree times as much as they paid into the programFour times as much as they paid into the program___________________________________ would stabilize costs and give us a fighting chance to keep Medicare solvent.
More choice and competitionHigher taxationLowering the eligibility ageAll of the above
- The national debt more than doubled in just the last decade, and it’s set to add another $12 trillion over the next ten years.
In February 2019, the national debt reached $22 trillion for the first time in the nation’s history.
View sourceIn January of 2009, the national debt was $10.6 trillion.
View sourceTen years from now the national debt is projected to be $34 trillion.
View sourceInterest rates are historically low, but “Every percentage point they rise adds another $13 trillion in budget interest costs over the next three decades.”
View sourceThe Manhattan Institute’s Brian Riedl warns that, as the debt increases, “it's likely that the rest of the world will take notice and stop lending money to the United States or demand higher interest payments for future borrowing, compounding the problem.”
View source- Under President Obama, the national debt doubled from $10 trillion to $20 trillion; it added another $2 trillion in Trump’s first two years.
The debt increased rapidly during the 2008 recession and has remained high in the years following.
View sourceUnder President Obama, the debt doubled from $10 trillion to $20 trillion.
View sourceIn the first two years of the Trump Administration, we’ve added another $2 trillion to the debt.
View sourceA country simply cannot continue to accumulate debt indefinitely. Europe was able to bail out Greece with some loans a few years ago, but Greece is a small country under the protection of the E.U. No other country or entity can bail out the U.S.
View sourceWATCH: “Should the Government Bail Out Big Banks?” – Nicole Gelinas
View source- Social Security and Medicare are the primary drivers of U.S. debt. Over the next three decades, they face a $100 trillion shortfall.
According to data from the Congressional Budget Office, Social Security and Medicaid face a $100 trillion shortfall over the next three decades.
View sourceBaby Boomers continue to roll into retirement age and become eligible for Social Security and Medicare, driving up their costs.
View sourceThe Manhattan Institute’s Brian Riedl notes that “senior citizens today are the wealthiest age group in the wealthiest country in world history,” yet the plan is “to raise $80 trillion over 30 years and give it to the wealthiest group in the country, rather than using it on any of our other national interests.”
View sourceWATCH: “Where is Our Debt Coming From?” – Brian Riedl
View source- If Social Security and Medicare go unchecked, the interest on that debt would consume 40% or more of all tax revenues in three decades.
Social Security and Medicare are projected to face a $100 trillion shortfall in three decades. That shortfall would increase “national debt to 150% of GDP,” the Manhattan Institute’s Brian Riedl estimates. “At that point, interest on that debt would consume 40% of all tax revenues or more, if interest rates rise.”
View sourcePaying all promised benefits would require either raising the payroll tax from its current 15.3% to 33%, or imposing a 34% national sales tax, suggests Reidl.
View sourceWATCH: “America’s Debt Crisis Explained” – Michael Tanner
View source- To deal with the aggressively expanding national debt, Washington must deal with Social Security and Medicare.
People live a lot longer than they did when Social Security was initially conceived. The average lifespan was 61.8 when the program was first enacted in 1935.
View sourceThe Social Security eligibility age needs to increase to reflect the longer lifespan of Americans.
View sourceTo save Medicare, the power of competition should be used to bring down costs. More choice and competition would help stabilize costs.
View sourceWATCH: “Social Security Won’t Give You Security” – Chris Hogan
View source- Taxing the rich won’t solve the national debt. We either have to severely tax the middle class—or reform Social Security and Medicare.
The debt cannot be solved by taxing the rich — in fact, that wouldn’t even come close to addressing the ever-escalating problem.
View sourceAmerica is faced with a difficult choice: "Either significantly raise taxes on the middle class or significantly cut benefits to current seniors,” maintains the Manhattan Institute’s Brian Riedl. “If we do neither, you will have a major financial crisis."
View sourceWATCH: “How to Solve America’s Spending Problem” – Michael Tanner
View source
In the 1958 movie, The Blob, starring a young Steve McQueen, a giant, expanding mass – a blob – threatens to destroy an entire town and everyone in it. It keeps growing and growing, and no one can stop it.
The United States debt is like that blob. Unlike the fictional blob, it threatens to destroy more than an entire town; it threatens the entire nation.
Where is Steve McQueen when you need him?
Here are some numbers.
The national debt currently stands at $22 trillion dollars. That's trillion – with a 'T.' Ten years ago, it was $10 trillion dollars. Ten years from now, it's projected to be $34 trillion.
The interest payment on our debt is currently $300 billion dollars per year, heading towards a projected $1 trillion dollars within a decade. At that point, a fifth of all federal taxes will go towards the interest on the debt, not education, infrastructure, and defense – you know, the stuff government is supposed to do. And that's with historically low interest rates. Imagine if those rates normalized. Well, maybe you don't want to imagine it because that picture is very dark.
In a better world, voters would be marching on Washington, demanding that our politicians dig us out of this hole before we're buried in it.
In the real world... almost no one cares. But we should care. And any thinking person, left or right, understands why. No individual and no nation can accumulate debt indefinitely. Europe was able to bail out Greece with some loans a few years ago. But Greece is a small country. If the US goes 'boom,' there's going to be no one to bail us out. So what's driving the debt? And, more importantly, how do we drive ourselves out of it?
The debt has been growing for decades. It got supercharged by the 2008 recession. Revenues fell while spending soared. Under President Obama, the debt doubled from $10 trillion dollars to $20 trillion. In the first two years of the Trump Administration, we've added another $2 trillion dollars.
So what are we to do?
First, we need to identify the primary source of the problem. It's pretty basic. You can talk about defense spending, welfare spending, or bloated budgets all you want, but it really comes down to two programs: Social Security and Medicare. Unless we get a handle on these monsters, the debt blob will continue to expand until it overwhelms us.
According to data from the Congressional Budget Office, these two programs alone face a $100 trillion-dollar shortfall over the next three decades. How is that possible?
Well, for starters, you've got 74 million Baby Boomers rolling into retirement age – 10,000 a day. On top of that, Medicare recipients typically receive benefits that are triple the size of what they paid into the system. Without some serious adjustments, these programs are going to fail. This is not the fault of retirees. It is simple demographics and math.
Paying all promised benefits would require either raising the payroll tax from its current 15.3% to 33% or imposing a 34% national sales tax. No – squeezing the rich, slashing defense, or eliminating welfare won't come close to paying the bill. Neither will any plausible level of economic growth. The 100 trillion-dollar hole is too big.
So let's talk fairness. If Mom and Dad can't make the mortgage payment, they don't tell the kids to get full-time jobs to make up the shortfall. They move to a different house that matches their budget.
Likewise, when America promises senior citizens benefits far exceeding what they paid into the system, we should not tell young working families that their taxes must be doubled or tripled. We should instead pare back those benefits to an affordable level. That's only fair and sensible, right? But when it comes to the debt, neither of these qualities seems to figure in. So what can we can do? More to the point, what can you do?
First, be sure to save for your own retirement. Do not overly depend on a government that has promised more than it can possibly pay out to take care of you.
Second, tell Washington to get a spine and deal with Social Security and Medicare.
People live a lot longer than they did when Social Security was first conceived in 1935. We need to gradually raise the Social Security eligibility age to reflect that. It's now 66. We need to get it to 68, and then 70.
That's pretty straightforward. Medicare is trickier. But a good solution already exists, amazingly within the Medicare system – the prescription drug program. Almost unprecedented among government programs, this one has come in below initial projected costs. Why? Because insurance companies have to compete for seniors' prescription drug business. So let's give seniors more options to shop around for the Medicare plans they want. More choice and competition would stabilize costs, and give us a fighting chance to keep Medicare solvent.
So are any of these ideas being seriously discussed in the halls of government?
We all know the answer to that question. Here comes The Blob.
I'm Brian Riedl, Senior Fellow at the Manhattan Institute, for Prager University.
Stay up to date on our latest releases
PragerU is changing the minds of millions worldwide. Help us keep our videos FREE!
Help support our mission
To make a donation over the phone, call (833) PragerU
At $35 or more you’ll be a PragerUnited Member
- Free merch every quarter
- Insider updates
- Free Annual Membership Sticker
Prager University is a 501(c)(3) nonprofit, Tax ID: 27-1763901. Your contribution is fully tax-deductible in the USA.