The United States’ national debt has ballooned to $39 trillion this year and interest payments on this massive debt amounted to $970 billion in fiscal year 2025, approaching the amount we spend on our national defense. Our national debt has grown exponentially over the past several years because of runaway deficit spending by Congress and the President. In 2025 the federal deficit was a whopping $1.78 trillion. The federal budget deficit in 2020, during the Coronavirus Pandemic, was $3.1 trillion.
In 2025, the total federal debt amounted to just over 120 percent of U.S. Gross Domestic Product. Compare this to 2001 when the national debt was only about 55 percent of U.S. GDP and it was the last time Congress and then-President Bill Clinton balanced the federal budget.
Members of Congress and Presidents from both parties have embraced massive deficit spending, both for stimulus spending during the Coronavirus Pandemic, as well as for President Trump’s extension of his first term tax cuts in the 2025 Big Beautiful Bill act.
The U.S. Government’s massive borrowing has the potential to
raise interest rates and to crowd out private investment. It greatly increases
the amount of the budget the government must allocate to paying interest
payments, and if the debt became too great as a percentage of GDP, it could
present a risk of default – and an economic crisis.
It makes sense for governments to engage in deficit spending
during economic crises to apply fiscal stimulus to the economy, increase
demand, and boost employment. This is precisely what Nobel Laureate and
economist Paul Krugman advocates for in his book End This Depression Now!
in response to the very high unemployment that ensued during the Great
Recession which followed the 2008 financial crisis. Both President Donald Trump
and President Joe Biden, with the help of Congress, engaged in substantial fiscal
stimulus during the economic freeze of the Coronavirus Pandemic, mailing direct
stimulus checks to American citizens and their children on three different occasions.
So, while President Obama’s fiscal stimulus in 2009 Professor Krugman found to
be woefully insufficient given the size of the U.S. economy, since then both
parties have embraced significant fiscal stimulus to address the economic downturn
of the Coronavirus Pandemic.
This is possible because, as Professor Krugman notes in his
book, that in relation to GDP U.S. debt is not terribly high and the prospect
of the U.S. defaulting on its debt is not likely to happen anytime soon. Also,
Japan has been maintaining very high debt levels where its debt as of 2023 amounted to 195 percent of GDP, and it has yet to experience a debt crisis.
However, does that mean the U.S. Congress and the President
should continue to pursue policies that result in one to two trillion dollars
more government debt every year when the economy is stable, unemployment is low, and GDP is growing at 2 percent?
Professor Krugman quotes economist John Maynard Keynes as
stating, “The boom, not the slump, is the time for austerity,” referring to
government budgets. And Professor Krugman points out in the book that after the
very large government deficits incurred during World War II, the U.S. decreased the debt in
relation to GDP in the ensuing decade by balancing its budget and allowing
robust economic growth to considerably increase the size of the U.S. economy.
There is not much interest among Democrats, liberals or
progressives for fiscal restraint during good economic times, however.
During these relatively good economic times, Congress and
Presidents have been being downright fiscally irresponsible. Much smarter
federal fiscal policy by the U.S. Government would be to balance or nearly
balance the federal budget during relatively stable or good economic times through
a combination of reducing spending and raising taxes. Then our country would be
on solid financial footing if ever again confronted by an economic recession or
depression that would necessitate a return to deficit and stimulus spending.
That said, the national debt is not all bad. Much of the national debt, $19.9 trillion in 2025, according to the Peter G. Peterson Foundation, is held domestically, with $4.4 trillion in mutual funds and $973 billion in pension funds, so a portion of debt payments are going into Americans’ pockets and retirement accounts, circulating throughout our economy.
A progressive argument for balancing the federal budget
while retaining or expanding progressive priorities – reducing health insurance
costs and providing greater health insurance access for Americans, providing
free or reduced-cost childcare, providing paid family and medical leave, and
fighting climate change and pollution by investing in clean, renewable energy –
would consider raising taxes on the wealthiest Americans, whose wealth has
grown exponentially over the past decade. Indeed, with the massive growth of wealth inequality in this country, it’s as though America now harbors an
Oligarchy of super-wealthy individuals.
Senator Elizabeth Warren (D-Mass.) has recently proposed an Ultra-Millionaire Wealth Tax to make America’s multi-millionaires and billionaires, the Oligarchs, who have reaped the benefits of a rising stock market and skyrocketing property values, pay their fair share in taxes. Senator Warren points out that economists Emmanuel Saez and Gabriel Zucman note that the families in the top 0.1% are projected to owe only 3.2% of their wealth in federal, state, and local taxes this year, while the bottom 99% are projected to owe 7.2%.
Senator Warren’s wealth tax proposal would tax households
with a net worth of $50 million or more. Households would pay an annual 2% tax
on every dollar of net worth above $50 million and a 6% tax on every dollar of
net worth above $1 billion. This wealth tax is estimated to bring in $375
billion a year.
In addition to a wealth tax, raising the federal corporate tax from 21 percent and closing the corporate tax loopholes which enabled a considerable number of corporations to pay no federal tax in 2025 (88 to be specific, listed in this report), according to the Institute on Taxation and Economic Policy, would raise more needed revenue. According to Senator Bernie Sanders (I-VT) “We have a [corporate] tax code that enables many of the country’s largest corporations, like Amazon, General Motors, Netflix, and Chevron, to make billions in profits while paying nothing at all in taxes year after year.”
Another Sanders suggestion is that we tax long-term capital gains from the sale of stock or other assets at the same level as we tax income. Currently, short-term capital gains, assets held for less than 1 year, are taxed according to your income bracket. But long-term capital gains, any capital held for more than 1 year, are taxed 0 percent, 15 percent, and 20 percent depending on your income level.
Those taxes could be raised 5 percent across the board, which
would still provide a discount over taxing long-term capital gains as income
and would bring in much needed revenue. Senator Chris Van Hollen (D-MD) and Representative
Don Beyer (D-Va.) have introduced their Millionaires Surtax Act, which would,
in addition to adding a 10-point surtax to incomes over $1 million (for
individuals), also apply to long-term capital gains.
In addition to these tax increase proposals (which avoid increasing taxes on the lower, middle and upper-middle classes), a progressive argument for balancing the federal budget would also consider reducing defense spending, which amounted to a $839.2 billion primary authorization, $152.3 billion for the Pentagon and $3.9 billion for Department of Energy nuclear weapons activities in 2026. Thus, U.S. total defense spending for 2026 amounted to $1.05 trillion. The U.S. already has the largest military in the world, and we spend more on defense than China, Russia, India, Saudi Arabia, the United Kingdom, Germany, Ukraine, France, and Japan combined.
Perhaps in part because of our enormous military power, our
current President has embarked on an aggressive, unprovoked, and unpopular war
against Iran, with 54% of respondents to a NBC News Decision Desk Poll stating
they disapprove of President Trump’s handling of the war against Iran. President Trump also recently
made an intemperate request in his 2027 budget for a $500 billion increase
in defense spending.
Massively increasing defense spending, at the potential expense of vital benefits like Medicare and Medicaid, is the wrong path for our country. Instead, partly given the burgeoning national debt and federal deficit, the U.S. should change its defense policy to take advantage of a ‘Peace Dividend’ and bring our defense budget into some measure of sanity. According to this article in by Lawrence Korb in The National Interest, the U.S. can significantly reduce its defense spending while not sacrificing its national security. For one, given the potential threats of China and Russia, the U.S. maintains powerful military alliances in addition to its own dominant military – NATO and the QUAD, which includes Japan, India, and Australia in the pacific. And, what are the real chances of a direct military conflict between the U.S. and China or Russia, two nuclear powers? This writer deems those chances very unlikely.
Other cuts to federal spending would still need to be made
to bring our federal budget into balance. Eliminating federal subsidies to
fossil fuel development could save about $4 billion per year, according to a proposal from the Brookings Budget Book. Other cost savings opportunities
should be investigated, including reforms to Medicare.
A runaway federal deficit and national debt creating growing
interest payments that rival the amount our government spends yearly on defense
is not a fiscally healthy path to be on. Democrats, liberals and progressives need
to acknowledge that balancing the federal budget during stable or good economic
times should be a priority and that a combination of raising taxes and cutting
federal spending is necessary for our country’s fiscal health.
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David Fine is a Freelance Writer
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