America’s budget has become an exercise in vice, with the federal government spending $2 trillion more than it has raised in taxes over the past 12 months. This massive deficit, equivalent to 7.2% of GDP, is occurring despite the country experiencing its longest period of sub-4% unemployment in half a century. The deficit has not dipped below 3% of GDP since 2015, a traditional benchmark for sound fiscal management. It is projected that next year, the national debt will surpass 100% of GDP, a nearly 40% increase over a decade.
The rising deficit can be attributed to a combination of factors, including the costs of wars, the 2008 global financial crisis, the current pandemic, unfunded tax cuts, and stimulus programs. Both Republicans and Democrats claim to value fiscal responsibility, but their actions in office often suggest otherwise. Each party has a track record of increasing spending and cutting taxes when in power, further exacerbating the country’s fiscal challenges.
The next president faces a significant economic decision in determining how to treat Donald Trump’s tax cuts from 2017. Renewing these cuts generously would only worsen America’s already dire fiscal situation. With interest rates no longer at near-zero levels, the government is spending more on servicing its debt than on critical areas such as national defense. It is clear that a change in approach is needed to address America’s growing budget deficit and mounting national debt.