For years now, economists have been warning that once baby boomers start to retire, the cost of entitlement programs like Social Security and Medicare would explode, straining the nation’s economy.
That time has arrived, Manhattan Institute senior fellow Brian Riedl said in an interview with the Deseret News.
The national debt is now about $200,000 per American household, and under “rosy” Congressional Budget Office projections, according to new data released by Riedl, the debt is projected to be 200% of gross domestic product in 30 years. These projections only hold up if there are no wars, recessions or high interest rates.
Budget deficits are expected to top $3 trillion a year within the next decade, driven almost entirely by the growing cost of entitlements, Riedl says. And new spending under President Joe Biden has exacerbated the problem — “in just 20 months, President Biden’s initiatives added $4.8 trillion to 10-year deficits,” Riedl writes.
Voters are aware this is a problem, he said in the interview. But, he said, they aren’t really willing to bear the brunt of it.
“Instead, people have become more adamant about their fake solutions that won’t actually work,” he said. “Which is to say, conservatives have become much more adamant about cutting foreign aid and waste and anti-poverty spending. And liberals have become more adamant about taxing the rich and cutting defense.”
The primary drivers of rising deficits are the increasing costs of Social Security and Medicare benefits, and people are broadly opposed to changes to those programs, he said. They also don’t want any tax increases that affect their families, he pointed out.
“So it seems like people are really, really concerned as long as the solution doesn’t affect them.”
Also of concern are rising interest rates, which are driving the cost of America’s debt higher as the government has to pay more interest on what it owes, leading to higher annual deficits. And as the nation’s debt increases, the Federal Reserve will have to keep interest rates high to attract lenders willing to loan the U.S. money, Riedl said.
“The danger is, every point interest rates rise costs $2.8 trillion over the decade in higher interest costs, and $30 trillion over 30 years, which is like creating another Defense Department,” he said. “So basically, if interest rates rise to 5% or 6% long term, we’re facing a massive debt crisis.”
Utah voters are concerned about the debt — but divided over what to do
Both of Utah’s senators, and its members of Congress as well, have said the rising national debt is cause for deep concern.
In a statement provided to the Deseret News, Sen. Mike Lee said the debt is driven by spending, not a lack of revenue, and is a “deep concern for the future economic stability and prosperity of our country.”
“Instead of continually raising taxes, we must rein in out-of-control federal spending. With a disciplined approach and the courage to make tough decisions, we can chart a path toward fiscal sustainability and ensure a bright future for our children and grandchildren,” he said.
Utah’s voters agree with Lee’s assessment, according to a new Deseret News/Hinckley Institute of Politics poll.
When asked how concerned they were about the nation’s debt, 61% of Utah voters said they were very concerned, while another 26% said they were somewhat concerned. Another 8% said not very concerned, and only 4% said not at all concerned.
Dan Jones & Associates surveyed 802 registered Utah voters from Oct. 12 to Oct. 23, 2023. The poll has a margin of error of plus or minus 3.46 percentage points.
There was less agreement among respondents over how to tackle the debt. Only 7% said lawmakers should raise taxes, while 19% said the government should cut spending on defense. On entitlement reform, 15% said the government should reform Social Security and Medicare, and another 9% said the government should cut spending on those programs.
Jason Perry, director of the University of Utah’s Hinckley Institute of Politics, echoed Riedl’s assessment on how voters feel about debt, and the cost of bringing it down.
“Utahns are largely concerned about the debt, but they’re not really interested in cutting the very programs that are at the heart of the biggest portion of the national debt,” he said, referring to Social Security and Medicare.
“When you have numbers where only 15% of voters say reform entitlement programs, or only 9% say reduce them, it gives you an idea of why it’s so difficult for members of Congress to take serious action on those two particular portions of the national debt,” Perry said.
Meanwhile 36% of Utah voters said they want the government to “reduce other spending,” and they were given a chance to say what spending they’d reduce. Many respondents said they would cut foreign aid.
But Riedl said the idea that we can tackle the debt by reducing foreign aid is false. Foreign spending, he said, is a “rounding error of a rounding error,” in the budget — no more than 1% of federal spending. And, he said, within that 1% is the cost of running U.S. embassies.
“And my two cents is some of that foreign aid is really bad and it goes to bad countries — and some of it is keeping 25 million HIV patients alive in Africa, at a cost of a couple billion dollars, and that’s probably not the first place I'd go.”
Spending to aid Ukraine or Israel comes from the defense budget, and even those costs aren’t driving long-term deficits, because they aren’t considered ongoing costs, he said.
On funds for Ukraine, Riedl said a lot of it hasn’t been direct cash payments.
“We’re basically giving them a lot of leftover military hardware, and then spending that money to rebuild our own stuff — to build newer, better stuff for ourselves to replenish it,” he said. “And the thing about Ukraine funding is, regardless of what one thinks of it, it’s a one-time cost. ... The savings long term are going to be minuscule because it’s a short-term one-time cost rather than a rollover annual part of the budget.”
Romney, Lee look for ways to cut spending, tackle debt
Earlier this year, Sen. Mitt Romney told the Deseret News that lawmakers have “a moral responsibility to act and the clock is ticking” to cut debt and shore up Social Security.
Romney has proposed a bill called the TRUST Act, which would require Congress to form “rescue committees” for several of the failing government trust funds, including for Social Security, and tasks them with coming up with a bipartisan plan for reform. The legislation would then require Congress to take an up or down vote on the proposals.
And last week, Romney and and West Virginia Democratic Sen. Joe Manchin proposed the Fiscal Stability Act, which would establish a commission charged “with finding legislative solutions to stabilize and decrease” the debt. This bill, similar to the TRUST Act, would require Congress to take an up or down vote on the proposed solutions.
Lee has also called for a reduction in spending, seeking long-term reforms during negotiations over the debt ceiling earlier this year and also in the lead-up to budget negotiations this fall.