America’s national debt is astronomical: $31 trillion — and counting.
But what does that number mean to the average American? Not much.
When my former company managed the 2009 “Defeat the Debt” campaign, the national debt stood at “only” $12 trillion. We quickly learned that people could not appreciate the size of a trillion of anything, and 12 was not a large number. Only after we used time and juxtaposed 1 million seconds versus a trillion could people relate (the former will elapse in 12 days, while the latter takes more than 30,000 years).
Messages about individual Americans owing $50,000 to pay the debt had no resonance. No one expected a bill from the IRS for their fair share. And therein lies a common public policy dilemma: As opposed to crime, higher food prices, or viral epidemics, people generally demand change only when faced with personal, short-term consequences. The debt just doesn’t qualify.
And so, $12 trillion becomes $31 trillion growing at the rate of $1 million every 30 seconds, 24 hours a day, every day. The last time the federal government avoided a budget deficit was over 22 years ago in the Clinton-Gingrich budget compromise. So, aside from the accumulated debt, we keep adding to the national debt every year, with interest on that debt exacerbating a problem that relatively few people understand.
That raises a second public-policy dilemma. In trying to sell any solution that upsets the status quo, the policy debate must first establish the need. Get the sequencing wrong, and you can expect all of the attention to focus on the “painful” solution without a consensus on the urgent need.
Case in point: President George W. Bush advocated private Social Security accounts in 2005. He tried to pitch the problem of Social Security’s looming shortfalls and the solution (e.g., privatization) at the same time. There was a certain conceit by Bush allies that everyone knew there was a problem. But beyond the “Beltway,” it was never that obvious. Threats of replacing a guaranteed safety net with a new idea didn’t fly.
Rather than first selling the legitimate fear of an unaddressed problem, the dominant conversation was fear of the solution. Left-wing elected officials and interest groups were benefiting politically from higher government spending (Social Security funds are commingled with other revenue). They sold the narrative that fears of program shortfalls were overblown. And despite the obvious math, as the historian Henry Adams once quipped, “Practical politics consists in ignoring facts.”
Can we do better in selling the threat? Interest payment on the debt last year was $475 billion. That was $1.3 billion a day. And what do taxpayers get for it? Nothing — zero. That’s an easy number to visualize.
The debt is scheduled to reach the $1 trillion-plus zone as the United States piles on more annual budget deficits and pays more interest on past interest. This is the federal government’s own payday loan.
What’s also easy to visualize but difficult to stomach is the inevitability of higher taxes to pay off the debt and related interest costs. According to many of America’s leading economists, the only viable way to pursue debt reduction is through a combination of reduced government spending and increased tax collection. This means tax increases across the board, affecting lower- and middle-class Americans in addition to the wealthy.
Want to raise enough money in the coming years to balance the budget by increasing taxes on the “1%,” or households earning over $400,000? Good luck! (To achieve balance, those people would have a tax rate of over 100%.) Ayn Rand would be vindicated.
So the money will need to come out of all pocketbooks, including those toward the bottom of the income ladder. Some will pay indirect tax rates. Everyone will pay whenever buying goods or services as higher business taxes get passed through at higher prices. No one is safe.
As the debt problem and its consequences for broader government spending become more omnipresent, elected officials will start looking for cover. They will point fingers at those who went before them. And as capital formation is compromised by debt, job formation will go down. Car loans will become unaffordable. The 1981-era mortgage rates of 18% may no longer be history.
The good news is that people will eventually demand a solution. The problem with short-term personal consequences will have been sold. But since we have waited, the fix will be more painful.
Perhaps our greatest impediment to early action is that Americans have heard about the debt for so long people have become inured to the message. It seems like a replay of the Aesop fable “The Boy Who Cried Wolf.” And we know how that one ended.
• Rick Berman is president of RBB Strategies.
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