The U.S. gross national debt surpassed $40 trillion last month for the first time in the nation’s history, and while the federal government is continuing to rack up debt at an increasing pace, fiscal challenges loom on the horizon for political leaders who are currently in office and those who will be competing in upcoming elections.
Earlier this year, the annual report of the Social Security and Medicare Trustees noted that the main Social Security trust fund is on track to be depleted in 2032, when automatic 22% benefit cuts would occur. Meanwhile, the growth in the national debt coupled with higher interest rates has caused the cost of servicing America’s debt to surge as the fast-growing portion of the federal budget, while also exceeding the size of the defense budget.
Michael A. Peterson, CEO of the Peter G. Peterson Foundation, told FOX Business that the growth in debt “is an urgent problem, and to me, $40 trillion is enough stealing from our next generation and it’s time to act. It has a negative effect on the economy, on wages, on affordability, but also on specific governmental programs.”
“In just six years, our Social Security system’s trust fund will run out and be fully depleted. And at that point, if Congress does nothing, we will have an automatic, across the board, immediate 22% cut to all benefits for all the beneficiaries,” he said. “Obviously, that makes no sense, that’s benign neglect of our retirees here, and we need to get at it.”
US NATIONAL DEBT HITS $40 TRILLION FOR FIRST TIME EVER
With Social Security’s insolvency just six years away, any senator elected in this fall’s midterm elections and the next president who is elected in 2028 would be serving terms that extend into 2032, when the trust fund is projected to be tapped out.
Social Security, along with Medicare and interest expenses, are the fastest-growing drivers of the annual U.S. budget deficit, which is currently projected to top $2 trillion for fiscal year 2026, which will conclude at the end of this month. Budget deficits are expected to widen in the years ahead as the debt grows, and interest costs continue to mount, along with the aging of the U.S. population.
“We’re basically taking $2 trillion from our future, we’re spending it now, and we’re saddling our kids and grandkids with $2 trillion of debt, plus all the interest on top of it,” Peterson said, adding that “interest is our fastest growing program, it’s going to double in the next 10 years.”
FEDERAL BUDGET DEFICIT ON TRACK TO SURPASS $2T THIS FISCAL YEAR AS SPENDING OUTPACES REVENUE
Peterson noted that unlike the geopolitical challenges around the world – including China, Russia, Iran and more – the U.S. government has the power to set its own budgetary policies in a way that implements reforms to stabilize or shrink budget deficits and, in turn, the national debt.
“The solutions are well-known. We have a whole series of revenues coming in the door through our tax policy. There are many changes we can make to that over time that would bring in more money, that would lower these deficits. And on the spending side, there’s a whole host of programs and different possibilities,” Peterson said.
US NATIONAL DEBT SURPASSES SIZE OF THE ECONOMY FOR FIRST TIME SINCE WORLD WAR II
He noted that the Peterson Foundation created what it calls the Solutions Initiative, bringing in seven think tanks from across the political spectrum to put forth solutions to stabilize the national debt as a share of gross domestic product, which reached 100% of GDP this year for the first time since 1946 and is trending to near 200% over the next 25 years.
“It really comes down to what your ideology is, how much revenue you want to bring in, how much spending cuts you’re willing to tolerate, and what combination of that makes sense to you,” Peterson explained, adding that all seven of the think tanks’ plans stabilized the debt.
“The good news is there are many combinations, many opportunities right in front of us. We don’t need to reinvent the wheel, we just need to have some political courage to get started.”
“Of course, this feels politically dangerous because you might involve more taxes or less spending. But at the end of the day, I think Americans are ready for this solution because they know this isn’t sustainable, and it’s not good for their long-term future,” Peterson said.
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