The growing national debt is on an unsustainable path and must be reduced to avoid long-term damage to the U.S. economy, experts warned on May 4.
“With respect to interest rates and soaring debt, we are sitting on a ticking time bomb. Congress should be working diligently to avert an otherwise-inevitable debt crisis,” Brian Riedl, a senior fellow at the Manhattan Institute for Policy Research, said in testimony before the Senate Budget Committee.
Jason J. Fichtner, vice president and chief economist at the Bipartisan Policy Center, confirmed that assessment.
“The nation’s debt is on an unsustainable trajectory, and action must be taken now. Further delay will only make the problem worse and the necessary corrections more harmful to the country and to the most vulnerable in our society,” Fichtner said.
The national debt stands at $31.4 trillion, which is the statutory borrowing limit. The Congressional Budget Office forecasts that the debt will reach $114 trillion in the next 30 years, which would be 200 percent of the country’s gross domestic product.
House Speaker Kevin McCarthy has insisted that an increase in the debt limit must be accompanied by spending cuts, resulting in a standoff with President Joe Biden, who has called on Congress to increase the debt ceiling without prior conditions.
The subcommittee hearing, titled “The Default on America Act: Blackmail, Brinkmanship, and Billionaire Backroom Deals,” appeared aimed at excoriating the Limit, Save, Grow Act, which was recently passed by the House of Representatives.
The measure includes a temporary increase in the nation’s debt ceiling along with spending cuts and caps, the rollback of certain green energy tax credits, and the easing of restrictions on drilling for oil and gas.
Senate Budget Committee Chairman Sheldon Whitehouse (D-R.I.) sharply criticized the bill, saying it would cost 790,000 jobs, shrink the economy by $141 billion in one year, and put 21 million Americans at risk of losing their health insurance, all while preserving tax cuts for the wealthy.
“Simply put, we must raise the debt limit. We must do it now. And we must do it without wrecking lives and livelihoods to appease eccentric billionaires,” Whitehouse said.
Most witnesses, however, focused on the need for an immediate bipartisan effort to raise the debt ceiling in order to avoid short-term damage to the economy and address the rapid growth of the national debt to avoid a catastrophe in the years to come.
Mark Zandi, chief economist at Moody’s Analytics, said the immediate priority should be to raise the debt ceiling to avoid defaulting on the nation’s obligations. He recommended a suspension of the limit until Sept. 30, the end of the current fiscal year, to allow adequate time for Congress and the president to negotiate a compromise.
In the long run, a more permanent solution is needed, Zandi said.
“We are on an unsustainable fiscal path. We need both additional tax revenue, and we need spending restraint. Both of those things need to happen, but we can’t do that in the current environment,” Zandi said, adding that significant spending cuts on the heels of rapidly rising interest rates would harm the economy.
“We need to end this drama as quickly as possible. If we don’t, we’re going to go into a recession, and our fiscal challenges will be made even worse,” he said.
For weeks, Republicans and Democrats have blamed each other for the growing national debt and the standoff over raising the debt limit.
The trio of economists, however, emphasized the need for bipartisan action.
“Raising the debt ceiling and tackling the fiscal challenges facing our nation will require both a bipartisan effort and presidential engagement,” Fichtner said. “Bipartisan cooperation is imperative.”
Biden is scheduled to meet with congressional leaders on May 9 to discuss the debt limit. The White House has said the meeting will be used to remind Congress of its constitutional duty to pay the nation’s bills but will also be the starting point for a separate negotiation on spending.
