Once upon a time, the United States’s ballooning national debt was a major talking point of presidential elections.
Donald Trump and Hillary Clinton’s final debate in 2016 featured a dedicated 12-minute segment on the topic.
Barack Obama and Mitt Romney clashed on the issue during all three of their debates in 2012.
Fast-forward to 2024 and, apparently, the national debt is not important any more.
The word “debt” did not come up once during Trump and Kamala Harris’s first, and so far only, debate earlier this month.
The Republican Party, traditionally most eager to claim the mantle of fiscal responsibility, did not include a single reference to the debt or the deficit in its 16-page platform document released in July.
It is not as though the debt is any less relevant today than it was during recent elections – quite the opposite.
In 2012, the national debt, excluding money owed by the government to itself, stood at $11.4 trillion, about 69.5 percent of gross domestic product (GDP).
Today, it stands at about $28 trillion, or about 99 percent of GDP.
The Congressional Budget Office (CBO) projects that the figure will top $51 trillion in the next decade to take the debt-to-GDP ratio to 122 percent – higher than in the aftermath of World War II.
Neither Trump nor Harris has paid much attention to this ticking time bomb, much less put forward serious proposals to defuse it.
In fact, both candidates’ policies are set to make the situation much worse.
While grandiose promises by politicians are not new, Trump and Harris have rolled out so many costly pledges – from Trump’s promise to extend his 2017 tax cuts to Harris’s plan for $25,000 in assistance for first-time homebuyers – that independent budget forecasters have struggled to keep up.
The nonpartisan Tax Policy Center has estimated that Harris’s agenda would grow the deficit by as much as $2.6 trillion over the next decade, while Trump’s proposals would increase the shortfall by $1.2 trillion.
The Penn Wharton Budget Model, which does not include some of the candidates’ most recent pledges, estimates that the deficit would rise by $4.1 trillion under Trump and $2 trillion under Harris.
“Neither candidate wants to address it,” Gary Hufbauer, non-resident senior fellow at the Peterson Institute of International Economics, told Al Jazeera.
“They both decided that talking about reducing debt is a losing proposition,” Hufbauer added.
There is some debate among economists about just how much debt the US economy can take on before it becomes a serious problem.
Unlike households, governments have indefinite planning horizons that allow them to constantly roll over their debts.
When it is time for governments to repay lenders, they can simply issue new debt to meet their obligations.
Compared with other countries, the US has a particular advantage when it comes to managing debt due to the dollar’s status as the world’s primary reserve currency.
Because the dollar is held in large quantities by central banks and financial institutions around the world, the US government can borrow at lower interest rates. It can also take on debt in its own currency, enabling it to avoid exchange rate fluctuations that would raise the cost of repayments.
Still, there is little disagreement that there is a point after which the debt cannot keep growing without serious economic repercussions.
Economists at the Penn Wharton Budget Model argued in an analysis published last year that financial markets would not sustain publicly held debt surpassing 200 percent of GDP.
Jagadeesh Gokhale and Kent Smetters predicted that the US government had about 20 years to take corrective action before reaching a point where no amount of tax increases or spending cuts would avert a default – a scenario that would send shockwaves throughout the global economy.
“This time frame is the ‘best case’ scenario for the United States, under markets conditions where participants believe that corrective fiscal actions will happen ahead of time,” Gokhale and Smetters wrote in their analysis published last October.
“If, instead, they started to believe otherwise, debt dynamics would make the time window for corrective action even shorter.”
Even if such a catastrophic outcome as a government default does not come to pass, the CBO has forecast that all federal government revenues will be directed towards social security and debt interest payments by the mid-2030s.
With every cent in taxes swallowed up by mandatory government spending, future administrations face being constrained in their ability to invest in growth-nurturing innovation or respond to emergencies such as recessions or the next pandemic.
Unfortunately, there is no pain-free solution to the debt problem that does not involve some combination of spending cuts and higher taxes – and the longer action is put off, the more bitter the remedy will be.
But in an era of populism, politicians have little incentive to talk about difficult choices and voters have little incentive to listen.