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Spokane, Washington  Est. May 19, 1883

Democrats and Republicans in Washington state agree the nation’s debt is unsustainable. What could Congress do about it?

Rep. Kevin McCarthy, R-Calif., talks with reporters in National Statuary Hall of the U.S. Capitol Building on Thursday, Jan. 5, 2023 in Washington, D.C.   (Kent Nishimura/Los Angeles Times)

WASHINGTON – When House Republicans brought Congress within hours of a government shutdown at the end of September – and when a handful of those GOP lawmakers succeeded in ousting Kevin McCarthy as speaker days later – they cited the same motive: reducing a federal budget deficit that has pushed the nation’s debt above $33 trillion.

Many Democrats agree that the deficit – the annual amount the government spends above revenue from taxes and other sources – is a problem. But in an era of intense partisan division, optimism that the parties can work together to solve it is in short supply.

The nonpartisan Congressional Budget Office projects the deficit will average $2 trillion a year over the next decade.

“It’s a mind-boggling number, and one that will take decades of concerted work by Congress to get down to more healthy levels,” said Andrew Lautz, a senior policy analyst at the Bipartisan Policy Center, a think tank dedicated to forging consensus between Republicans and Democrats. “And of course, we’re not seeing that level of bipartisan interest and cooperation in Congress.”

In an interview Sept. 29, Rep. Cathy McMorris Rodgers, R-Spokane, voiced the perspective of most Republicans at the Capitol, who favor cuts to federal spending and oppose any tax increases.

“Part of the reason that we find ourselves in this situation is because of continuing to spend and add to the debt,” McMorris Rodgers said, referring to a potential shutdown that looms again in mid-November. “We need to address the spending and the debt in this nation.”

Rep. Pramila Jayapal, who leads the Congressional Progressive Caucus, takes the opposite view. In an interview Sept. 19, the Seattle Democrat resisted the idea that the deficit is a problem and said Congress should be spending more on social programs while raising taxes on large corporations and the ultra-wealthy to increase revenue.

“We should actually be increasing our spending on the investment side,” Jayapal said, arguing that spending on things like health care and child care would improve lives and spur economic growth that could strengthen the economy in the long run. “I would be happy to talk about the deficit, as long as we’re talking about the revenue side.”

More moderate Democrats say they are concerned about the deficit and debt, while pointing out that Republicans have been willing to run up deficits to finance tax cuts, suggesting GOP hand-wringing about the debt is less than sincere – or at least takes a back seat to political expediency when Republicans are in power.

“We need to bring down the deficit, especially in times when we are economically doing well, but I think that it happens with a responsible balance of revenue and spending changes,” Rep. Kim Schrier, D-Sammamish, said Sept. 19.

Schrier pointed out that Republicans want to renew the 2017 tax cuts they passed in the first year of Donald Trump’s presidency, which included tax relief for corporations and the wealthiest Americans. The Congressional Budget Office, projects that renewing those cuts when they expire in 2025 would increase deficits by $3.5 trillion.

“That really belies this notion that it’s the deficit they’re worried about,” Schrier said of Republicans.

Another problem, Lautz said, is that the perennial budget fights in Congress focus on just a fraction of the government’s total spending. In fiscal year 2022, a little more than a quarter of the budget went to discretionary spending, which lawmakers must approve each year through the appropriations process. Nearly half of that spending is on defense, which has increased each year since 2015 without much opposition from either party.

“Nobody’s concerned about the deficit when it comes to spending even more on the Pentagon,” Jayapal said. “I just think that the way that we talk about the deficit is completely backwards, and what we need to do is think about investment in people. And then if we want to raise revenue, think about making the tax system fairer.”

Roughly two-thirds of the budget is dedicated to mandatory spending on programs such as Social Security and Medicare, which is essentially on autopilot unless Congress acts to change course. That means the noisy spending fights that routinely threaten government shutdowns revolve around small portions of the budget that couldn’t solve the debt problem on their own.

The U.S. government has borrowed money since its inception and regularly incurs more debt by selling securities through the Treasury. About two-thirds of that debt is held by people and institutions in the United States, with the Federal Reserve accounting for the biggest chunk, according to Treasury Department data. The other third is held by foreign creditors, led by Japan.

Ryan Herzog, an associate professor of economics at Gonzaga University, said it’s important to understand that not all debt is bad. Like a household, borrowing money can allow the government to make investments that pay off in the long run.

But while politicians often compare the nation’s debt to a household budget, Herzog said that analogy only goes so far. While people typically earn money in the middle of their lives to save for retirement, that’s not the case with a government.

“The government lives forever – at least we hope it does – so it’s not like your typical household budget,” he said. “It’s OK to have debt. We need to just be mindful of what that debt is, and the cost of carrying that over a long period of time.”

More important than the total debt number, Herzog said, is the ratio of debt to income, measured by the country’s gross domestic product. By that metric, the debt peaked at 133% of GDP in 2020, when the Trump administration borrowed huge sums for pandemic relief programs, but debt is still about 119% of GDP today, according to Federal Reserve data.

At the turn of the 21st century, the U.S. government actually had a budget surplus, but a series of events and policy decisions starting in 2001 changed that trajectory. The 9/11 terror attacks spurred a major increase in spending on the military, which the administration of President George W. Bush funded by borrowing money while cutting taxes. The Bush-era tax cuts were extended under President Barack Obama, while spending on the wars in Afghanistan and Iraq continued.

The financial crisis that began in 2007 prompted the Obama administration and Congress to borrow more money for an economic rescue package in 2009, while the ensuing recession lowered revenues. The Trump administration increased deficits to fund tax cuts and pay for pandemic relief.

“Neither party is exclusively responsible for the run-up in debt and deficits that we’ve seen in the 21st century,” Lautz said. “Both parties share some of the blame, and both parties need to work together on long-term solutions.”

William Gale, co-director of the Urban-Brookings Tax Policy Center, a partnership between two nonpartisan think tanks, said part of the problem is that elected officials seldom make the politically tough choices – raising taxes and cutting spending on popular programs – that could reduce deficits.

“In the long term, obviously there has to be a reckoning, because we’re on a path that doesn’t make sense, that’s not sustainable,” he said. “But in the short term, we have plenty of latitude.”

For example, Gale said, the Congressional Budget Office projects the trust funds that support Social Security benefits will run dry in a decade. But Congress could fund Social Security with general revenues, even if that hurts future generations.

“It’s always something that can be pushed off,” he said. “It’s hard to find a real back-to-the-wall moment.”

Gale said he sees two options to overcome the short-term political calculations that make the debt problem seemingly unsolvable: a bipartisan commission of serious lawmakers who can share responsibility for unpopular choices, or a president who uses the bully pulpit to rally the nation behind those necessary steps to improve Americans’ collective economic future.

In response to a question from The Spokesman-Review on Oct. 2, White House spokeswoman Karine Jean-Pierre said reducing the deficit is a priority for Biden, whose legislative accomplishments include funding intended to help the Internal Revenue Service crack down on tax dodging by corporations and the rich. The deal Biden struck with McCarthy in May to raise the debt limit would lower deficits by $1.5 trillion by 2033, the Congressional Budget Office projects.

“Clearly, this is a president that wants to focus on lowering the deficit,” Jean-Pierre said. “This is something that you hear him talk about almost every time he talks about the economy.”

Rep. Marie Gluesenkamp Pérez, a Democrat who represents southwest Washington, said Sept. 29 she wants to see a bipartisan commission to address budget deficits with a combination of spending cuts and higher taxes on the biggest corporations and richest Americans, who pay far lower tax rates today than they did in decades past.

McMorris Rodgers said the idea of a bipartisan budget commission has been discussed among House Republicans. Sen. Patty Murray, a Washington Democrat who chairs the Senate Appropriations Committee and led bipartisan budget negotiations that resulted in a 2013 deal, said Sept. 29 that such a process hadn’t been formally raised as part of talks to avert a shutdown.

“I can tell you, after years of experience, words on a paper matter when you talk about something like that – how much power they have, who’s on it, how it’s going to be decided, what the implementation is,” Murray said. “I have not seen any of that language, and that’s critical.”

In remarks at the University of Wisconsin on Sept. 26, former House Speaker Paul Ryan, who was Murray’s GOP counterpart in negotiations a decade ago, said he had little hope that lawmakers could fix the nation’s debt problem anytime soon.

“We’re going to have to rethink how we do our fiscal policy in the 21st century, so that we can have a good 21st century, so that we can stave off a debt crisis,” Ryan said. “Our politics are so unserious right now that those kinds of comprehensive solutions aren’t in the offing.”