Time to invest in our fiscal health

The nominal national debt is around $19 trillion, an attention-grabbing number that conservatives use to justify draconian spending cuts. But what matters far more to fiscal health is debt as a share of the economy — if the economy grows faster than debt, debt as a share of gross domestic product (GDP) will decline. 

One of the most important ways we can reduce the debt-to-GDP ratio is by investing in broad-based economic growth. This was at the core of America’s success in the decades after World War II. We invested in our people through the GI Bill, extending the promise of a college education to millions of returning veterans, and in our infrastructure, building the nation’s interstate highway system. It paid off. Publicly held debt as a share of the economy fell from more than 100 percent at the end of the war to around 25 percent by the mid-1970s — even though the budget was in balance only about a quarter of the time.

{mosads}We also need to be honest about the nation’s long-term fiscal challenges and what’s driving deficits. Increasing deficits are largely caused by something we cannot control: the fact that Americans are getting older. Everyone who has studied the debt issue, from think tanks like the Center on Budget and Policy Priorities to the Peterson Foundation to House Budget Committee Chairman Tom Price (R-Ga.) and House Speaker Paul Ryan (R-Wis.), say projected deficit growth is primarily the result of baby boomers entering their retirement years, meaning more and more Americans will be receiving Social Security and Medicare benefits. 

The number of people age 65 and older is expected to increase by at least one-third over the next 10 years. As a result, the Congressional Budget Office (CBO) projects that Social Security and Medicare spending will increase substantially, accounting for nearly two-thirds of the increase in annual program spending between 2016 and 2026. By contrast, spending on all government programs aside from Social Security and Medicare is on track to decline as a share of the economy, with spending on nondefense discretionary programs projected to hit its lowest level on record in 2018. 

Republicans blame the federal debt on — no surprise — President Obama. They rely on a blizzard of misleading claims, as well as a little amnesia. First, let’s remember that former President Bill Clinton ran a budget surplus his last four years in office. Former President George W. Bush quickly turned the surplus into a sea of red ink, first by pushing for two enormous tax cuts that favored very wealthy Americans and second by leading America into two immensely costly wars. The tax cuts added $1.5 trillion to cumulative deficits over 10 years. It is estimated that in the long term, the two wars together will cost American taxpayers $4 trillion to $6 trillion.

While the debt has increased during the Obama administration, Republicans conveniently omit that much of this is due to the aftereffects of the financial crisis that occurred under the Bush administration. A tanking economy drove tax receipts down, driving deficits up. As millions of Americans lost their jobs, spending on unemployment compensation and other automatic stabilizers increased. 

The Obama administration in fact has helped dig us out from the Great Recession, and now the deficit as a share of GDP has fallen by three-fourths — from 10 percent to 2.5 percent.

Democrats have also taken steps to reduce the long-term drivers of our deficits. One of the most important has to drive down the costs of medical care. The Affordable Care Act (ACA) is bending the cost curve and reducing long-term costs. From 2010 to 2014, Medicare spending per enrollee actually declined at a 0.6 percent average annual rate. Medicare spending under current policy is now projected to be nearly $125 billion lower in 2020 than it was projected before the ACA was implemented.

The CBO estimates that repealing the ACA would increase long-term deficits. Nevertheless, Republicans have voted to do that more than 60 times.

Republicans are wrong about the ACA, and they continue to be misleading about the debt. It’s time to stop focusing solely on the size of the debt in order to justify large cuts to things Americans care about. Let’s learn from history. Let’s improve our fiscal situation by investing in our future. 

Maloney is the ranking Democrat of the Joint Economic Committee.