As national debt exceeds 100% of GDP, we need to stop the bleeding

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Dear Editor:

It’s happened – the national debt is now larger than the U.S. economy, about twice the historic average. We’ve heard plenty of alarm bells in the past few years about our fiscal path, but this one rings especially loudly. The real question is whether or not our leaders in Washington will listen.

The national debt hit 100.2 percent of Gross Domestic Product (GDP) at the end of March, based on new economic data released by the Bureau of Economic Analysis. Debt held by the public on March 31 was $31.27 trillion, while nominal GDP was an estimated $31.22 trillion over the prior 12-month period.

With debt now above 100 percent of GDP, it’s only a matter of time until we pass the all-time record of 106 percent reached in the immediate aftermath of World War II. This time the borrowing isn’t borne from a seismic global conflict, but rather a total bipartisan abdication of making hard choices.

The higher we allow our debt to grow, the more we erode our own prosperity and that of future generations. Rising debt compromises affordability by slowing income growth, pushing up interest rates, and increasing inflationary pressures. Debt squeezes our budgets with massive interest costs. It exposes us needlessly to challenges from geopolitical rivals. And without corrective action, rising debt could spark a devastating fiscal crisis.

To put the country on a prosperous and sustainable path, we need to stop the bleeding. That starts with rejecting any new borrowing and offsetting new spending or tax cuts twice over under “Super PAYGO.” But to stabilize and reduce debt as a share of the economy, we’ll need to go much further – we need about $10 trillion of deficit reduction. One option among many is to follow the bipartisan momentum towards bringing deficits down to 3 percent of GDP, which would help bring the debt below 100 percent of GDP over time. What’s most important is turning this pattern of inaction around – there is no time to lose.

Maya MacGuineas
President, Committee for a Responsible Budget