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A Fiscal Time Bomb Set to Explode [1]
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Date: 2025-01-18
If we are going to increase the debt ceiling, each bill should be limited to three months so that Congress is forced to confront, on a quarterly basis, the unsustainable level of our federal debt and educate the American people on the true situation. Eliminating the debt ceiling would be fiscal suicide because the U.S. lacks fiscal discipline.
Trump’s 2017 Tax Cuts and Jobs Act (TCJA), set to expire on December 31, 2025, was a grand-scale theft. This included lowering the corporate tax rate from 35% to 21%, even though businesses only requested a reduction to 25%. These cuts were made “permanent”—though nothing is truly permanent in Congress. Pushed by the oligarchs, Trump now wants to extend the tax cuts for the wealthy. The TCJA also lowered the top tax rate for the rich from 39.6% to 37%—a 2.6% reduction may not seem large, but when you’re dealing with billions, it equates to millions in savings. The TCJA added about $2 trillion to the national debt over ten years, but during Trump’s four years in office, the national debt increased by $7.8 trillion—more than any other president.
The U.S. has not seen a balanced budget since 2001, the last year of budget surpluses. At that time, the total federal debt was about $5.8 trillion. As of January 2025, that figure is approximately $36.17 trillion. Just like global warming, everyone thinks they can keep kicking the can down the road. This tactic works until it doesn’t, and when it doesn’t, the results can be catastrophic.
Nations can handle reasonable debt levels. There are debates on what an acceptable debt-to-GDP ratio should be. Some say a ratio between 70% and 90% is manageable, while others argue that 60% should be the maximum. At the end of WWII, the U.S. debt-to-GDP ratio was 120%. Currently, the U.S. debt-to-GDP ratio stands at 124%, meaning our debt exceeds the total annual economic output of the country. This is twice what it should be, and Trump, alongside the oligarch class, wants to increase it further to add to their already obscene levels of wealth. This demonstrates their greater concern for their pocketbooks than for the country’s future. It also reveals how much financial flexibility and resilience the U.S. has sacrificed, making the nation vulnerable to a wide range of economic risks. A single failure could trigger a catastrophic chain reaction.
To reduce the debt-to-GDP ratio back to 90%, the U.S. would need to pay off $9.55 trillion. The required payoff would be $17.65 trillion to reach a 60% debt-to-GDP ratio. Paying off the former would return us to a 2010 level while paying off the latter would return us to a 2003 level. It is far, far better to start paying down this debt with a relatively strong economy than with one crippled by economic turmoil.
We don’t need to increase the debt ceiling if we begin running annual surpluses and paying down the federal debt. But this is a pipe dream if the Congressional Budget Office expects the federal debt to increase by $23.9 trillion by 2035, bringing the total federal debt to $60.07 trillion. And that’s without any further tax cuts from Trump. If Trump seeks tax cuts, they would add another $4 trillion to the national debt, making it $64.07 trillion.
If we do acknowledge that we must increase taxes, we want someone else to pay them. This is called many things, including “tax shifting” or the more common NIMBY—Not In My Backyard. Tax shifting seems to be a delusion commonly experienced by many Democratic politicians. Republican Scott Bessent, Trump’s nominee for Treasury Secretary, expressed the Republican delusion. At his confirmation hearing, he said, “We do not have a revenue problem in the U.S. We have a spending problem.” Both political parties get it wrong because they are trapped in magical thinking.
The emperor has no clothes, and we are all emperors. A thousand years ago, I took a course in social psychology. I don’t remember all the constraints we had to consider, but we worked in teams to design the ideal society. Of course, we couldn’t agree on much, and the complexity of the task was overwhelming. Now, here I am again.
I’ve been using ChatGPT to generate a U.S. federal budget with tax changes and some expense reductions to create an annual surplus of one trillion dollars. I’ve gone through at least 20 simulations to develop a workable plan, and I’m still not done. But I invite you to try it for yourself. It’s harder than it looks, especially when you factor in wealth inequality while aiming for something that might actually work. As I proceeded, it became clear that tax shifting was not possible. Everyone had to bear some portion of a higher tax burden for the plan to work. Keep in mind that the largest budget surplus since 1950 occurred in 2000, with a surplus of $236.2 billion. An ongoing surplus of $1 trillion would allow us to pay down the U.S. debt slowly but surely.
I encourage you to try this exercise to appreciate the complexity and trade-offs involved. Then, demand that your two senators and congressional representative do the same to understand how they would address the U.S. debt crisis.
Every American stands before two doors. The door on the left is proactive—it requires solving the debt crisis effectively through changes to taxes and spending to create a budget surplus. The door on the right is reactive—it means doing nothing or making the situation worse until economic disaster comes knocking and it knocks us all down.
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