“Oh, no! The sky is falling because our national debt is rising!” Smell familiar? Well, it would if hypocrisy gave off a rank odor. I know it sounds familiar, because it’s the same claptrap we hear from Republicans whenever there’s a Democrat in the White House. They never want to raise the debt ceiling—except when a Republican president like The Man Who Lost An Election And Tried To Steal It asks them to.
When Republicans last controlled the White House, the Senate, and the House of Representatives, they passed increases in the debt ceiling—which, for the 1,776th time, doesn’t increase spending or authorize new spending, it just allows our government to pay the bills it has already rung up. The GQP liked doing it so much, they did it twice, in 2017 and 2018. Democratic majorities in Congress also raised the debt ceiling under the twice-impeached former guy, in 2019.
So Trumpist bleating about our national debt is bullshit, we’ve established that—and it’s also worth noting that the cost of servicing that debt is actually half what it was about 30 years ago. But we progressives should be really angry about our national debt too—not the fact that our government is borrowing money, but the manner in which it does so.
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In olden times (i.e., the middle of the 20th century), there were some important things about our country that needed changing, in particular around the issue of equal rights for members of those groups who traditionally had not enjoyed them because of their race, gender, or other form of identity—and thankfully we’ve made real progress since then, even though we obviously have more work to do. But one important thing we did right back then was distribute the tax burden much more fairly than today.
In the 1950s, wealthy families had an effective tax rate (what they actually paid, after deductions, etc.) of around 50%. The rich paid about half of what they made. Since Ronald Reagan, and then George W. Bush, and then Trump enacted one Rich Man’s Tax Cut after another, what the wealthiest pay has shrunk drastically, to an average effective tax rate of 8.2% over recent years, less than many middle-class Americans. What does this have to do with the debt ceiling, or the federal debt in general? I’m glad you asked.
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If the wealthy had in recent years paid enough in taxes to keep up with our country’s needs, the government could have avoided the level of debt we have now. Because they don’t, the federal government borrows money to pay the bills. This borrowing is done via bonds, and these bonds require the government to pay interest to the bondholder—just like you do when you borrow money from the bank to buy a house or car. And to whom does most of the interest payments on the federal debt go? I’ll let economist Robert Reich take it from here:
The biggest recipients of these interest payments are not foreigners but wealthy Americans who park their savings in treasury bonds held by mutual funds, hedge funds, pension funds, banks, insurance companies, personal trusts, and estates.
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This means that a growing portion of your taxes are going to the wealthy in the form of interest payments, rather than paying for government services everyone needs.
So, the real problem isn’t America’s growing federal budget deficit. It’s the decline in tax revenue from America’s wealthy combined with growing interest payments to them.
What can our country do about it in terms of policy? Well, for starters, we can repeal the Trump tax monstrosity that shifted even more of America’s money up the economic ladder. But don’t the provisions of that elitist tax legislation expire in 2025? Not exactly, only the parts that do at least something for the middle class. The parts that help the rich the most—the ones that cut taxes on “corporate profits, investment income, estate tax, and more” are, of course, permanent.
What can we, as citizens, do about it? Well, we can make sure to elect as many progressives to Congress as possible. Plenty of Democrats—led by President Joe Biden—wanted to make progress on this issue in the last Congress. But not Kyrsten Sinema—and hey, she’s not a Democrat anymore—but that was enough to put the kibosh on any substantive change.
For far too long, the rich—not the poor—have been the primary beneficiaries of unearned government largesse. That’s got to change. Right now.
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Ian Reifowitz is the author of The Tribalization of Politics: How Rush Limbaugh's Race-Baiting Rhetoric on the Obama Presidency Paved the Way for Trump (Foreword by Markos Moulitsas)