Interest on the U.S. debt is really driving the growth at this point, says Maya MacGuineas

The Congressional Budget Office sounding the alarm. It is projecting that the US debt will climb to 166% of the USGDP by 2054. That would be up from 97% in 2023. It’s also predicting that the Social Security pension fund will be depleted by the year 2033. Joining us right now to break down the highlights of that report, Low Lights or Low Lights is Maya McGinnis, Committee for a Responsible Federal Budgets President. Maya, these are pretty staggering numbers. You want to lay it out in a little more detail? Yeah, I mean, there’s no good news to be found here. Honestly. We know that the debt is on a steady March upward relative to the economy. The biggest drivers continue to be the aging of the population, healthcare. But I think most worrisome these days is that interest on the debt is really driving the growth at this point. And that’s something the only way you can control is if we make the necessary changes of raising revenue and cutting spending. And though last year we did have one good step on that with the Fiscal Responsibility Act, that’s not something you see Congress really willing to tackle in any meaningful way. So we are going to have spending growing over the 30 years that the CBO looks at in this in this document to record record levels, 27% of GDP, much higher than it’s been in the past, and our deficits and debt are all going to be reaching records. This slows economic growth. This weakens us from a foreign policy stand. It is not good for the health of the country and it it’s the result of two political parties that are so busy beating each other up, they can’t compromise and do any of the hard things we should be working on. We had a conversation with Mohamed El Erian just a few moments ago talking about some of these issues and the warnings that have been out there for decades that somehow haven’t really caught up to us yet. And I I think that is what has made it easy for the two political parties to say not our problem at the moment, not something we need to worry about. What everyone’s warning is, I think they’re painting you as a Cassandra for for saying, OK, we don’t need to listen to this just yet. What what’s your idea? Back to that, absolutely it’s very easy to dismiss this. Both the political parties do. But also, you know how voters that aren’t really concerned about the issue because it’s very difficult to see how it connects to anybody’s daily life. But here’s what happened. Over the past decades, we had huge interventions from central banks. We had much more global flows and we had changing in demographics that affected the economy, that kept rates lower than people would have expected. The result of that though was people actually encouraged the government to borrow more and borrow they did. And as we saw the past couple years, when inflation hit, which it still does as a result of many things, but part of that was fiscal stimulus. If inflation hits and interest rates have to go up, which they do, you suddenly have a very huge effect on your interest payments because the larger the debt is, the more sensitive we are to growing interest rates. And as we see those fluctuations, it’s going to show the vulnerabilities that we have that are even worse because we waited so long to fix these problems. The other issue, of course, you mentioned, but Social Security and Medicare both have trust funds that are going insolvent in just about a decade. By waiting and doing nothing to fix those, we’ve left the people who depend on those programs incredibly vulnerable. And the changes are going to have to be much more difficult than they had to be if we’d gotten out ahead of this. So yeah, the political class is eager to find excuses not to do anything hard, but it doesn’t mean it’s good for the country. And in the end, the changes we have to make are going to be much more difficult. Probably the high levels of debt already are slowing the economic growth, which is really such an important factor looking forward, particularly as we have demographic headwinds making that more challenging. Maya, the revenue side is obviously really difficult to to try to deal with. You don’t know what helps when you try to raise revenue. You don’t know if you’re hurting growth. So that’s a problem. But one thing that we probably could address more realistic is, is spending. But then again, we really can’t. And and I know you saw 2025 the the spending, you know, for the pandemic, we got up over 6 trillion for emergency spending. We’re still doing 7 trillion for 2025 and spending. And if you don’t pay for it, that adds on to the overall debt, which just is once again, your interest expenses adds on to what your interest expense. So it’s just it’s like this vicious cycle. Where could we cut, where could we cut spending in, in your view, do we cut defense in this dangerous world? Do we cut? Are there things now? Every time I hear the Biden administration talk about spending, they say they’re investing. I don’t want them investing for me. I’ll invest my or let the private sector stop investing for me. Yeah, you’re absolutely right. So spending is growing on a trajectory that is much, much faster than growth, much faster than revenues. And the short term changes in the president’s budget would have spending on going to go huge boost from very high levels. So the answer to your question is we have to look to cut spending almost everywhere. The biggest parts of our budget are healthcare and retirement programs. We have to look at those programs. I know everybody for running for president promises not to touch Social Security. We have to fix the program. If we do nothing, there will be across the board 23% benefit cuts for everybody. So I’d look at slowing the growth of Social Security benefits. I would look at growing, raising the retirement age for younger workers. Lots of things we can do on health care costs that would slow the growth there. Looking how the Medicare payments program is structured, you do have to do domestic discretionary cuts like we did in the Fiscal Responsibility Act and those are going to have to hold. We’ve seen so hard how hard it was to stick with them just for one year. We’re going to have to prolong those over time. I used to think that there was a lot of savings in defense. I still think there’s a lot of savings in defense, how we do procurement and other things. But I think as you say, in this much more dangerous geopolitical environment, that’s probably going to have to go back into other areas of defense. I leave that to the experts, but it’s a riskier world, which is actually a reminder of why it was so dangerous to borrow for things we didn’t need to borrow for. So that now when there’s real pressures and real things to think about, cybersecurity, AI, all of these issues, it’s much harder to find the room in the budget to have a budget that’s nimble and responsive to the current environment. And by the way, we still have a social contract that is ensuring for the risks of last century instead of the risks that current workers and families face today. So that’s outdated, not making any changes there. Just one other point, we talk about revenues, the all these long term scary budget numbers assume the tax cuts will expire and that’s not going to happen. We know that there’s going to be some amount of taxes that are extended. Both parties want that, so that will make the numbers even larger.