New York Times op-ed: The National Debt Is Still a Problem, by Greg Mankiw (Harvard):
“I’m the king of debt.” So declared Donald Trump while running for president in 2016. Alas, he was not kidding.
When President Trump moved into the White House, the government debt held by the public stood at $14.4 trillion. The most recent figure is $16.1 trillion. And under current law, that number will keep rising with no end in sight. ...
Historically, the most important cause of large deficits has been spending on wars. ... Running a large budget deficit is also reasonable during an economic downturn. ...
But the current budget deficit is not as easily justified. President Trump says his goal is to scale back military entanglements around the world, so temporary wartime spending is no excuse. Nor is the state of the economy. It is currently strong, with employment having grown robustly over the past two years. The unemployment rate is 3.6 percent, its lowest level since 1969.
In these circumstances the norm should be a small budget deficit, or even a surplus. But that is not the case now. In 2018, the deficit was 3.9 percent of G.D.P., compared with an average deficit of 2.1 percent of G.D.P. over the previous 70 years.
Even so, the current deficit is less worrisome than its trajectory. The Congressional Budget Office estimates that, under current law, the deficit will increase to 4.6 percent of G.D.P. in 2023. That projection is based on the plausible but optimistic assumption of continued economic growth and no major military conflict.
Because of these deficits, the government debt held by the public will rise to 85 percent of G.D.P. in 2023, reaching the highest level since 1947, the Congressional Budget Office says. And if current law remains unchanged, the debt will keep rising as a percentage of G.D.P., eventually reaching levels never seen in the United States. That is simply not sustainable. ...
If we are not going to saddle future generations with ever-increasing government debt, we need to find a great deal of money. That means either spending less or taxing more.
I would prefer to curb spending. For example, to prevent Social Security’s funding shortfall from enlarging the government debt, we could slowly increase the age of eligibility. The government would still provide a safety net for the very old, but others would have to keep working or use their savings to pay for an earlier retirement.
But I recognize that my preferences might not reflect those of the body politic. Many people want a more expansive government to address such problems as the rising cost of health care and the explosion of student debt. Doing so would require higher taxes. ...
The conceit of some on the left is that all this can be done just by taxing the rich more. Yes, some revenue can be found there. ... But the problem of rising government debt is too large to solve simply by taxing a small sliver of the population. Congress will need to consider broader-based taxes, such as the value-added taxes that efficiently raise substantial revenue in many European nations.
If higher taxes are the eventual solution to rising government debt, as seems likely, then we all are going to have to pay more. If we don’t, our children will.