South Florida Sun-Sentinel Palm Beach (Sunday)

US debt now $31 trillion: Here’s how it grew so big

Record level result of both parties’ choices on taxing, spending

- By Jim Tankersley

WASHINGTON — America’s debt is now six times what it was at the start of the 21st century. It is the largest it has been, compared with the size of the U.S. economy, since World War II, and it’s projected to grow an average of about $1.3 trillion a year for the next decade.

The United States hit its $31.4 trillion legal limit on borrowing this past week, putting Washington on the brink of another fiscal showdown. Republican­s are refusing to raise that limit unless President Joe Biden agrees to steep spending cuts, echoing a partisan standoff that has played out multiple times in the last two decades.

But America’s ballooning debt is the result of choices made by both Republican­s and Democrats.

In just two decades, America has added $25 trillion in debt. How it got itself into this fiscal position has its roots in a political miscalcula­tion at the end of the Cold War.

In the 1990s, America reaped a so-called peace dividend. It reduced spending on the military, believing it would never have to invest as much in national security as it had when the Soviet Union was a threat. At the same time, a dot-com boom delivered the highest federal tax receipts, as a share of the economy, in several decades.

As the 20th century ended, America’s coffers were flush with tax revenue and light on military obligation­s, a combinatio­n that many leaders thought would hold up well into the future. It did not last a year.

The dot-com bubble burst, cutting into tax revenue. The Sept. 11 attacks spurred a furious rearmament push in Washington as President George W. Bush mobilized wars in Iraq and Afghanista­n.

Bush, a Republican, broke from historical precedent and did not raise taxes or issue war bonds to pay for those conflicts. Neither did his successor, President Barack Obama.

The Defense Department estimated last year that the direct costs for the wars in Iraq, Syria and Afghanista­n exceeded $1.6 trillion. Brown University researcher­s — who add indirect costs, particular­ly care for veterans of those wars and interest on the money borrowed to finance the military — found that the total cost was much higher: just under $6 trillion for all of America’s “war on terror” efforts after Sept. 11.

As military spending surged, federal revenue declined as a share of the economy. That decline was a direct result of tax cuts that Bush signed in 2001 and 2003. Those tax cuts were temporary, but in 2012, Obama struck a deal with congressio­nal Republican­s to make more than fourfifths of them permanent.

In 2018, a new round of Republican tax cuts signed by President Donald Trump — which did not include spending cuts to offset their cost — kicked in. They were passed by some of the same lawmakers now contending that the government must not raise the borrowing limit without first taking steps to rein in debt.

Some conservati­ves those cuts would “pay for themselves” by boosting economic growth and tax revenue, but the nonpartisa­n Congressio­nal Budget Office estimated in 2018 that the law would add more than $1.2 trillion to the debt through the 2022 fiscal year.

Some new, permanent spending programs also contribute­d to the debt. A Medicare prescripti­on drug benefit, passed on a bipartisan basis under Bush, “clearly” increased deficits, costing more than $100 billion in 2022 alone, said Josh Gordon, health policy director for the Committee for a Responsibl­e Federal Budget in Washington.

Gordon said it was much harder to calculate the deficit impact of Obama’s Affordable Care Act. It has pushed up federal spending on Medicaid and health insurance subsidies, but also raised some taxes. And the changes it made to the health care system have contribute­d to a reduction in Medicare spending compared with previous projection­s.

The biggest — and often bipartisan — drivers of debt have been the federal responses to two sharp economic downturns: the 2008 financial crisis and the 2020 pandemic recession. Shortly after Obama took office in 2009, inheriting a recession, he pushed Congress to approve a nearly $800 billion package of tax cuts and stimulus spending.

Trump approved a much larger collection of aid packages, totaling more than $3 trillion, after COVID-19 swept the world in 2020. Biden took office the next year and signed a $1.9 trillion stimulus plan soon after.

Economists disagree on the size and design of those responses. But they generally agree that by borrowing money in a sharp downturn, the government helped revive the economy and protect people and businesses.

 ?? LAURENT REBOURS/AP 2003 ?? U.S. Navy medics treat an Iraqi POW. Recent wars have had a profound impact on the national debt, now six times what it was at the start of the 21st century.
LAURENT REBOURS/AP 2003 U.S. Navy medics treat an Iraqi POW. Recent wars have had a profound impact on the national debt, now six times what it was at the start of the 21st century.

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