“We must create a new standard of living for the 21st century,” President Trump said at the outset of Tuesday’s State of the Union address, later urging the joint session of Congress, “Tonight, I ask you to choose greatness.” But over the course of a speech that spanned nearly 90 minutes, Trump completely ignored the biggest long-term threat to American greatness: the looming federal debt crisis.
When Trump took office in 2017, he inherited a substantial level of debt, which accumulated during President Barack Obama’s two terms as the fallout from Great Recession coincided with the retirement of Baby Boomers. On the month Trump was sworn in, the Congressional Budget Office predicted that the debt held by the public would reach $24.9 trillion by 2027. Last week, two years after being sworn in, the CBO now projects public debt of $25.9 trillion in 2027.
The CBO noted that by 2029, “federal debt would be higher as a percentage of GDP than at any point since just after World War II — and heading still higher.” Unlike World War II, which was an extraordinary event after which the U.S. was able to pay down its debt over time, the twin problems of the aging of the population and rising healthcare costs mean that absent serious reform, the problem is always going to get worse.
“Beyond 2029, if current laws remained generally unchanged, deficits would continue to grow over the following 20 years, driving debt to its highest levels in the nation’s history,” CBO noted. “Those large budget deficits would arise because outlays — particularly for Social Security, Medicare, and interest on the debt — would grow steadily under current law, and revenues would not keep pace with those outlays.” In fact, Social Security and Medicare account for three-quarters of the increase in spending over the coming decade.
If the U.S. does not address this debt problem, it will be impossible for Americans to achieve the “new standard of living” which Trump called for Tuesday night.
As the CBO put it, the growing debt would have “significant negative consequences” for the economy and other federal priorities. For example, interest payments would increase substantially; increased federal borrowing will reduce national saving, hindering productivity and putting downward pressure on wages; and lawmakers would have less flexibility to address unexpected issues. In addition, “the risk would rise of investors’ being unwilling to finance the government’s borrowing unless they were compensated with very high interest rates.”
Ultimately, the CBO warned that avoiding such outcomes will require significant changes to fiscal policy.
Instead of addressing this national emergency, Trump offered more of the same. He boasted of cutting taxes and increasing military spending, while pushing for more spending on infrastructure. At no point did he mention the urgent need to reform Medicare and Social Security.
Trump’s vision for America won’t be possible if the current policy continues on autopilot. Instead, the rising national debt will threaten military spending, lead to crushing tax rates, and force sudden, severe cuts to government spending to stave off a financial collapse.
