SCOTT SIMON, HOST:
A fiscal milestone, not exactly of the welcome kind - the national debt topped $40 trillion this week. How did we get there? We can look to Congress. NPR's congressional reporter Eric McDaniel joins us. Eric, thanks so much for being with us.
ERIC MCDANIEL, BYLINE: Happy to be here.
SIMON: What does this milestone mean? I mean, is 40 trillion more scary, really, than 39 trillion?
MCDANIEL: I mean, I think the important thing to know is that the national debt right now is bigger than the size of the U.S. economy. As you know, debt is not inherently a bad thing, right? Imagine you borrow money to invest in a college education or start a business. But the economists I talked to for this story pointed out a few things beyond that top-line number.
One - the rate at which the U.S. economy is growing compared to the rate the debt is growing is not good. The debt is growing faster. The government projects the debt will grow twice as fast as the U.S. economy over the next 10 years. Two - the government is using debt to pay for current regular spending, not big generational projects. Here's labor economist Kathryn Anne Edwards.
KATHRYN ANNE EDWARDS: We are not building a federal highway system. We are not tackling climate change. We are not making generational investments in children.
MCDANIEL: And there's also kind of a compounding problem, right? The more debt you have, the higher the overall interest rates are, the more money that goes to servicing that debt or paying that interest. Right now it's about a fifth of all U.S. tax revenue each year.
SIMON: At the turn of the century - 2000 - the United States was on track to pay off the national debt. Twenty-six years later, things are very different. How did that happen?
MCDANIEL: Here's a real shocking answer. They spent more money. That's mostly automatic increases, like paying more for Social Security as folks get older - also big-ticket items. We bought generationally long wars in Iraq and Afghanistan and stimulus packages to prop up the economy after the 2008 financial crisis and during the coronavirus pandemic. Then, Congress decided to take in less money. Republicans repeatedly passed huge tax cuts, and those tax cuts ultimately didn't grow the economy enough to offset the lower share of income that the government was taking in. Jessica Riedl, a conservative economist at Brookings, kept it simple when explaining it.
JESSICA RIEDL: It's just been a yearly drumbeat of spending increases and tax cuts.
SIMON: Eric, what are some of the proposed solutions?
MCDANIEL: Well, views differ. Republicans are in favor of continuing to cut spending on government programs. But it's hard to make the math work with just spending cuts, right? The president's One Big Beautiful Bill cut government tax revenue by $4.5 trillion over 10 years but only cut spending by about a trillion over that time, meaning overall it adds to the debt rather than reducing it. Democrats want to invest more in social programs like childcare, which they think will grow the tax base. Here's Edwards again.
EDWARDS: You know, if you could tell someone, I have a magic wand to get parents 10% higher income, people would be desperate for it. But of course, we don't need a magic wand. We just need universal preschool.
MCDANIEL: She also says we have to raise taxes. Riedl agrees that taxes have to rise, but insists there need to be spending cuts, too. She says there aren't painless solutions. Everyone's ox is going to get gored, as she put it to me.
RIEDL: You really can't fix the deficit without addressing Social Security and Medicare.
MCDANIEL: And I don't have to tell you those are the third rails in American politics, programs that are as expensive as they are popular.
SIMON: I used to hear about lawmakers who were deficit hawks. Do they exist anymore in Congress?
MCDANIEL: Look. For my money, I think that was already kind of overplayed as a force. But we've seen in the last 25 years, when we talk about fiscally minded Republicans, it's folks who are hawkish on tax rates and social spending.
The new Senate Budget Committee chairman, Ron Johnson of Wisconsin, says he'll be vocal about wanting things to be paid for, though he supported the president's One Big Beautiful Bill last year that dramatically increases the debt after telling NPR it was "immoral" and "grotesque." Those are quotes. He said the president promised future spending cuts to win over his vote. But we'll see how Johnson handles a looming fight - nearly 100 billion in proposed spending, largely on the military, in a reconciliation package this fall, none of which is paid for.
Treasury Secretary Scott Bessent told CNBC that the White House will come up with a plan on the debt, but there's just no simple way to make up a $2 trillion hole in the annual budget. That's more or less the amount Congress appropriates annually for the whole kit and caboodle of typical federal spending.
SIMON: Well, thanks very much. NPR's Eric McDaniel.
MCDANIEL: I love to bring the joy, Scott. Transcript provided by NPR, Copyright NPR.
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