The debt and interest albatross
By Blake D. Moore
As we celebrated the Fourth of July and reflected on the past, present, and future of our nation, I was reminded of something Thomas Jefferson once wrote: “It is incumbent on every generation to pay its own debts as it goes.”
This is a fiscal imperative and moral obligation that has gone ignored at our own peril. Today, the fastest-growing part of the federal budget isn’t infrastructure, education, healthcare, or even defense. It is the interest payments on the national debt itself.
These hidden expenses have become a fiscal albatross, an ever-present weight around the neck of the economy and a burden that is draining growth and opportunity. Congress must play a central role in educating the public about this existential threat to our economy, national security, and way of life.
The nonpartisan Congressional Budget Office reports that the United States will spend $892 billion on interest payments this year — up 153% since President Joe Biden took office. This situation has decayed so rapidly that, for the first time in our history, interest payments now exceed what we spend on our national defense. At this point, we spend more only on Social Security than anything else. It is as inconceivable as it is indefensible.
The new CBO economic outlook issued in June projects $22 trillion in deficits over the next 10 years — more than all our cumulative borrowing between 1789 and when Biden took office. As a result, an estimated 60 cents of every dollar borrowed will go to interest.
If a family had to borrow that much just to pay interest on their accrued debt, they would not be able to pay for other priorities, such as education, homeownership, or travel. Over time, it would become harder and harder for this family to stay above water.
That is precisely America’s gloomy fiscal reality. The national debt is projected to hit $35 trillion soon, growing by $1 trillion every four months.
In Utah, we know how to budget responsibly. Just three months ago, Utah was named the best economy in the nation for the 17th consecutive year by the American Legislative Exchange Council. Elected leaders in Utah understand how to steward our resources and enact pro-growth policies that lower prices and drive innovation. These are the values I am bringing to Washington on the House Budget Committee.
My committee colleagues and I have a responsibility to communicate with our constituents and clearly explain this financial bind so we can rally support and create change. We are working on a three-pronged effort to raise public awareness, mobilize constituent support, and drive legislative action against deficit spending.
Through oversight hearings and roundtables, Budget Committee members have been proactive in working with experts and stakeholders to spell out the dangers of this level of borrowing and interest payments. We have directed the CBO to provide full analyses of the fiscal implications of government policies, such as Biden’s open border policies. And in my district in Utah, I’ve convened a Debt and Deficit Task Force to put together a framework of solutions for our federal budgeting process, modeled after Utah’s successful efforts.
Washington must address the interest albatross. If we don’t, we risk forcing the next generation to inherit a national economy ridden with debt, decline, and diminished opportunity.
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However, the needle will never move without building public support for change. That’s why my colleagues and I are sounding the alarm about our unsustainable fiscal path and communicating, convening, and cajoling all interested parties about the need for solutions.
So, as we celebrate our freedoms this month, let us also commit to forging a path to realizing our fiscal independence. We must heed Jefferson’s warning and act decisively to ensure that we do not burden future generations with the consequences of our inaction. Together, through hard work and a renewed sense of urgency, we can safeguard the American dream for generations to come.
Blake D. Moore is a U.S. representative for Utah and the vice chairman of the House Republican Conference. He serves on the House Budget Committee and Ways and Means Committee.
2025’s looming tax fight: A chance to help the working-class family
By Robert VerBruggen
Next year is going to see an epic showdown over tax policy. Many provisions of Republicans’ 2017 tax law are set to expire, and most people’s taxes will go up if Congress doesn’t step in.
Of special interest to parents, and to Republicans’ growing working-class base, will be how the final compromise treats marriage and children among the less well-off. Getting this right is the key to supporting families without forgetting the lessons of welfare reform.
The 2017 tax law doubled the child tax credit, making it now worth up to $2,000. Without congressional action, it will be halved again, though the old exemptions for dependents will also return.
The CTC is designed to refund parents’ income taxes and, for lower earners, reimburse some of their payroll-tax burden as well. It isn’t sent as a check to parents who don’t pay taxes at all, and it “phases out” for the extremely well-off.
Today’s CTC thus supports parents by significantly reducing their tax burden, and it also supports work — because one must work and pay taxes to benefit. But the Left, and even parts of the pro-family Right, have sought to remove that latter guardrail.
Giving the benefit even to nonworkers, or making it “fully refundable,” would destroy the work incentive built into the CTC. This is out of step with what people say they want.
Lawmakers should resist such proposals and be skeptical of smaller steps in that direction, such as giving out the CTC based on work in either of the past two years, rather than just the year for which taxes are being filed. (A bill currently before Congress, though it looks unlikely to pass before the election, takes this approach.)
Instead, the CTC should largely be continued as it is today, though it should automatically increase with inflation, which doesn’t currently happen.
Beyond that, lawmakers looking to boost help for families should look at a different policy: the earned income tax credit.
Like the CTC, the EITC is given only to those who work and focuses on parents (though nonparents can receive a small benefit). But unlike the CTC, the EITC sends checks to workers in excess of the taxes they pay — and it phases out as parents rise through the middle class, instead of only for the wealthiest taxpayers.
This structure makes it a powerful incentive to work and a strong, focused support system for working-class families. But there’s one huge problem: the EITC brutally punishes working parents for being married, as I recently pointed out in a Manhattan Institute report.
Say a parent with two children earns $35,000, and the parent’s romantic partner earns the same amount. If the couple is unmarried, the parent will receive around $4,000 this year. Married, the couple will receive nothing.
Want thousands of dollars? Don’t marry someone who works. Unsurprisingly, some single parents make exactly that choice. A 2016 study found that “single mothers who expect to lose earned income tax credit benefits upon marriage are 2.5 percentage points less likely to marry their partners and 2.5 percentage points more likely to cohabit.”
The status quo’s astonishing depravity, however, presents an extremely attractive option for those looking to restore and help the working-class family. Addressing this marriage penalty would provide additional funding specifically for folks of modest means who (a) are married, (b) work, and (c) have children. And it does so not by creating a special benefit just for them, but by addressing a bias against them in the current system.
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There are numerous options for addressing this problem, which will come with varying price tags. For example, the EITC could be based on the income of the higher-earning spouse rather than the couple’s total income, or policymakers could allow married couples to subtract part of their second income. Given the country’s dire fiscal straits, policymakers should not expand benefits beyond what their eventual compromise is able to pay for.
This thorny issue combines tax burdens, family policy, and the parties’ evolving political constituencies. The looming expiration of a major tax law is going to force Congress to deal with it in a polarized environment. Next year’s fighting won’t be pretty. But it can result in a durable compromise that supports working families.
Robert VerBruggen is a Manhattan Institute fellow.
Time to free America from Bidenomics
By David Ditch & E.J. Antoni
This Fourth of July felt particularly ironic. We celebrated the anniversary of America’s Founding Fathers declaring independence from a monarchical ruler, yet we find ourselves in a similar situation today.
While the Founders risked everything to free the country from tyranny and succeeded in doing so, President Joe Biden has reversed their advances in liberty. His stifling regulations, disregard for constitutional order, and massive subsidization of the activist Left mean that people remain burdened by the whims of the chief executive.
In 2021, Biden inherited an economy that had largely recovered from the COVID-19 pandemic, with annual inflation at a mere 1.4%. He and his allies in Congress proceeded to launch a campaign of reckless “stimulus” spending and economic micromanagement on a scale that King George III could have never imagined.
The Biden administration’s executive actions and administrative choices have cost more than $700 billion. In just 3 1/2 years, the gross national debt has increased by more than $7 trillion, or roughly $53,000 per household. The annual interest payments alone on that debt are now more than $1 trillion.
Hardworking people are paying a heavy price for the Bidenomics agenda, which unleashed the highest inflation in 40 years and forced up interest rates.
Prices have risen so fast under Biden that despite the average worker’s weekly pay increasing more than $150, that larger paycheck buys about $40 less. For the typical family with two parents working, this lost purchasing power is the equivalent of losing almost $4,300 in annual income.
Adding insult to injury, higher interest rates have increased borrowing costs on everything from mortgages to credit cards, and from student loans to auto loans. The deadly combination of high prices and higher interest rates has caused the total cost of purchases to explode.
For example, the monthly mortgage payment on a median-price home today has increased 120% since January 2021.
The typical family’s lost purchasing power from inflation and higher borrowing costs have together cost them the equivalent of almost $8,000 in annual income. Bidenomics has dug quite a deep hole for the average person’s finances.
If this sounds bleak, remember that there were many dark moments for the fledgling United States during the Revolutionary War, but the American spirit held firm for years despite those difficulties and persevered to victory.
Similarly, it will likely take years to undo the damage caused by Bidenomics and remove Washington from the center of economic life.
Congress is primarily responsible for setting federal policy and deserves much of the blame for what has occurred over the last three years. The Biden administration, for example, could not have implemented most of its radical agenda without having access to hundreds of federal agencies, thousands of programs, and trillions of dollars in spending authority.
A serious examination of federal activity reveals many opportunities for streamlining.
The more than $1 trillion per year in transfers to state and local governments, for instance, not only leads to mountains of waste but also centralizes power in Washington in ways that go against the nation’s founding principles — and often the 10th Amendment.
Congress should also rein in spending on special interest handouts, pork projects, and agencies that promote the agenda of the activist Left. Removing wasteful and unnecessary spending would be a necessary first step toward a responsible federal budget.
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In turn, significantly lowering federal deficits would reduce inflationary pressures in the economy and make it easier for interest rates to come down to earth. That would allow families to finally catch up with the higher cost of living that is the main hallmark of Bidenomics.
In 1776, the cause of freedom in the New World meant winning independence from Great Britain. For America’s semiquincentennial in 2026, it will mean winning independence from Washington’s failed economic agenda.
David Ditch is a senior policy analyst, and E.J. Antoni is the Richard F. Aster fellow, at the Heritage Foundation’s Grover M. Hermann Center for the Federal Budget.
Social Security Is In Worse Shape Than It Looks
By Bill Cassidy
The rot runs deeper than we thought.
In May, the public received another update from the Social Security trustees confirming that the Social Security Trust Fund will be insolvent in nine years. But buried in the data was the alarming statistic that the total cost of Social Security insolvency has ballooned to $615 trillion in nominal dollars — yes, trillion. That’s a nearly $100 trillion increase in debt from three years ago. We cannot afford to wait and see how much higher that number will go.
That $615 trillion accounts for the cost of paying benefits and interest on the debt the United States would accrue if we allow Social Security to go insolvent and deficit-spend to keep it afloat over the next 75 years. This underscores both the severity of the problem and the need to stop burying our heads in the sand.
When the Social Security Trust Fund is depleted in nine years, current law dictates an automatic 21% benefit cut for all current and future retirees. Congress can avoid this cut by deficit spending, but it should pursue a strategy to make the program sustainable and fairer. We need a comprehensive plan that avoids massive benefit cuts or tax hikes and avoids putting us on the road toward $615 trillion in additional debt.
A Senate working group I’m leading has a proposal that accomplishes both. Our “Big Idea” creates a new fund separate and independent of the Social Security Trust Fund. This new fund would invest $1.5 trillion in financial markets, just like a normal pension fund, and hold it and all dividends in escrow for nearly 75 years.
Assuming historically average market return, our “Big Idea” covers about two-thirds of Social Security’s shortfall, including the borrowing costs. The remainder can be addressed without raising taxes on seniors or decreasing their benefits.
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In addition to this, our proposal would repeal the Windfall Elimination Provision and Government Pension Offset, create work incentives, and even evergreen the Social Security Trust Fund.
Fixing Social Security is a math problem that will take political will to tackle. We know the longer we wait, the less favorable the math becomes and the more painful it will be to fix. This isn’t hyperbole —we’re seeing the effect in real time. Investing now may save our country, and taxpayers, $615 trillion in debt down the line. That seems like a worthwhile investment for almost any reasonable American.
Bill Cassidy is a U.S. senator for Louisiana and serves on the Health, Education, Labor, and Pensions Committee.
Dark clouds on US industrial policy horizon
By Scott Lincicome
Industrial policy is back in Washington, D.C., and its supporters are already crediting it with an American manufacturing “boom.”
In one narrow sense, they have a point: Shortly after Congress and the Biden administration authorized trillions of dollars in federal subsidies for renewable energy and semiconductors under the Inflation Reduction Act and the CHIPS and Science Act, U.S. manufacturing investment and construction increased significantly.
Two other matters, however, show why these trends are less promising than they appear and why people should worry that the subsidies, and protectionism, supposedly fueling a U.S. manufacturing renaissance will repeat America’s long history of industrial policy failure.
First, the recent increase in U.S. manufacturing investment must be put into context. Before the CHIPS Act and Inflation Reduction Act were enacted in 2022, market factors had pushed companies to reconsider semiconductor supply chains. Private demand for, and investment in, green energy was soaring. And several major U.S. projects had also been announced. It’s thus unclear how much manufacturing spending has been caused by, instead of just coincident with, new U.S. industrial policies.
Furthermore, recent increases in industrial spending are still a relatively small percentage of total private investment, making up just 3.6% of private investment in the first quarter of 2024, and 0.6% of the United States’s GDP. The spending might still be important, but it’s not currently the economic game changer it is often made out to be.
Indeed, actual U.S. manufacturing performance — employment, output, orders, and capacity utilization — has been flat since mid-2022. Private surveys have been pessimistic, and 2024 projections are now softening. Maybe a “boom” eventually arrives, but it is just as likely we’re again seeing what critics of targeted tax credits, subsidies, and tariffs have long cautioned: They don’t generate sustainable, long-term growth but instead redistribute existing resources to favored companies at a net loss to the U.S. economy.
Second, we must also consider the actual return on these investments.
When the government showers preferred companies with trade restrictions and trillions of taxpayer dollars, the policies will inevitably produce something. The real question is what, exactly, all that government support is getting us.
Is it generating dozens of innovative and globally competitive American factories and a strong U.S. economy? Or will it produce a few narrow successes and many other failures — not just unfinished projects but entire industries dependent on government support, plus unintended and unseen costs elsewhere?
Today, it is too early to say, but there are already warning signs here and abroad — ones we’ve seen before.
Here at home, the cost of building, staffing, and starting production at subsidized facilities has skyrocketed thanks in large part to supply-side barriers, such as environmental permitting regulations, tariffs, Buy American Act restrictions, and immigration backlogs. High costs and other unforeseen problems have also now delayed or canceled many semiconductor, electric vehicle, and solar projects, even some in which construction had begun.
Just as worrying are initial signs that factories eventually completed in the U.S. will not produce cutting-edge technologies that compete globally without open-ended government help. Solar panels, for example, still cost more in the U.S. than they do abroad, even with billions in subsidies and multiple rounds of tariffs. The industry’s solution? It’s seeking even more tariffs.
Finally, politics is again distorting industrial policies’ implementation. Social policies such as free child care and diversity initiatives have been attached to CHIPS subsidies. Inflation Reduction Act dollars have been disproportionately funneled to swing states. Companies have openly complained about slow and complicated bureaucracy, and investment uncertainty has increased in the run-up to the 2024 presidential election.
These and other matters remind us there’s a huge chasm between celebrated investment announcements and actual, productive factories. They also show the risk that today’s industrial policies produce small benefits at a massive cost — both the usual budgetary overruns and the diversion of finite taxpayer and private resources away from better targets.
There are also concerns abroad because subsidies here have prodded the European Union, Japan, South Korea, Taiwan, India, China, and others to offer subsidies of their own — thousands of new industrial policy measures, likely worth trillions of dollars. If history is any guide, this uncoordinated and predictable “global subsidy race” could generate gluts and trade wars that would undermine the very domestic investments U.S. industrial policies are trying to encourage. In the end, almost everyone would be worse off, especially developing countries that can’t afford big subsidies and, in the case of “green” goods, the environment itself.
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In sum, American industrial policy has long faced challenges that limit its effectiveness and inflict unintended economic and geopolitical damage. It’s too soon to conclude that we’re following the same path today, but signs do point in that direction. This doesn’t mean that Congress should just sit back and watch things unfold, simply hoping its trillion-dollar gamble pays off. Instead, it should repeal the industrial policies and implement the long list of proven tax, trade, regulatory, immigration, and other reforms that free marketers have long recommended to boost strategic industries and address strategic challenges.
Subsidies and protectionism, however, still aren’t on that list.
Scott Lincicome is the vice president of general economics and Cato’s Herbert A. Stiefel Center for Trade Policy Studies.
Restoring America’s military industrial base
By Tom Rogan
Determined to subjugate Taiwan under Chinese Communist Party rule, China is building warships and weapons at a vast pace and scale. Our military — and economy — simply is not ready.
If Taiwan falls, the American alliance structure in the Pacific will suffer a potentially deadly blow. China will be able to compel the political obedience of Japan and the Philippines by holding their trade flows at risk. Both those countries are U.S. treaty defense allies. Taiwan’s fall will mean the destruction of the world’s most advanced semiconductor chip manufacturer, TSMC, or, even worse, China’s assumed control over that manufacturing behemoth and the critical international export industry it provides.
It’s clear that Chinese President Xi Jinping is deeply serious about securing Taiwan sooner rather than later. He has told the People’s Liberation Army to be ready to effect a successful invasion of the island democracy by 2030. Xi views that objective as the most critical test of his leadership and a matter of destiny for the CCP.
The United States is not prepared for this fight. Too few are willing to admit this truth and prepare for it. But others, such as the Marine Corps and Air Force Secretary Frank Kendall, have greater courage.
Speaking last September, Kendall posited, “If we were asked tomorrow to go to war against a great power, either Russia or China, would we be really ready to do that? And I think the answer is not as much as we could be, by a significant margin. And we’ve got to start spending a lot of time thinking about that and figuring out what we’re going to do about it.”
The inadequacy of the defense industrial base looms large. The problem here isn’t simply America’s present incapacity to build enough of what is needed but an incapacity to do so efficiently and on budget. Any serious agenda to restore America’s economic strength and prosperity must address this industry’s failures.
Take shipbuilding. In 2024, the U.S. Navy’s combatant surface and submarine forces are too small. And with China in mind, the problem is getting worse. As the Center for Strategic and International Studies notes, “The [People’s Liberation Army Navy] operates 23 destroyers launched in the past 10 years compared with 11 operational U.S. destroyers. … China’s productive advantage is reflected in the relative ages of active Chinese and U.S. ships. About 70% of Chinese warships were launched after 2010, while only about 25% of the U.S. Navy’s were.”
Some of these PLA warships, such as the Type 055 air defense cruiser, are highly capable and able to rival their U.S. counterparts. Chinese anti-ship ballistic missile platforms are also highly advanced, able to force U.S. carrier strike groups to operate far further from Taiwan than would be ideal. Put simply, the U.S. needs more destroyers, submarines, and long-range anti-ship/land attack missiles — and it needs them now.
The central U.S. challenge in fixing this growing imbalance is the need to bolster the defense industrial base. Today, just about every surface warship and submarine under construction is delayed. Costs are also exceeding estimates, sometimes very significantly. In addition, a shortage of construction facilities and skilled workers means that certain vessels are having to be prioritized to the detrimental delivery time frame of others. But there are also insufficient penalties imposed upon defense manufacturers that exceed budgets while failing to deliver on time. All of this must be addressed.
For starters, Congress should appropriate funds to construct new shipyards. Congress should also authorize grant programs providing college/education tuition relief to engineers and machinists who work in the defense industrial space for at least five years. The president and Congress should also provide legal cover to allow for nonunion labor in shipbuilding construction. These reforms would help to address the shortage of skilled workers and the incapacity to build more ships.
The Biden administration or a second Trump administration should also ramp up bulk purchases of Joint Air-to-Surface Standoff Missile-Extended Range and Long Range Anti-Ship Missiles and Powered Joint Direct Attack Munition bombs. Current inventories of these crucially valuable weapons would likely last only one week of war with China.
Finally, the U.S. should entertain naval construction contracts from close allies such as Japan and South Korea, which have shown themselves able to do what we cannot and build excellent warships on time and on budget.
Accountability also matters. Where admirals and generals in charge of procurement decisions and construction efforts fail to deliver, they should be relieved. Too often, these officers and civilian Pentagon officials are reluctant to impose consequences on powerful defense contractors for their cost overruns and delays. Sometimes this reluctance is informed by a desire to take up lucrative positions with those same companies on retirement. Other times it is a result of congressional cronyism. But the importance of organizations such as Naval Sea Systems Command (responsible for overseeing warship construction) cannot be overstated.
So also must political leaders be held accountable by the media and voters. We need far less legislation of the kind offered by Sen. Tammy Baldwin (D-WI), for example, which makes it harder and more expensive for the Navy to buy critical shipbuilding materials at lower costs.
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We also need less cronyism in defense procurement decisions. Too many otherwise defense-knowledgeable members of Congress such as Reps. Rob Wittman (R-VA) and Kay Granger (R-TX) support the retention of worse-than-useless warships because doing so helps their local economies. This prevents the military from diverting resources to programs that might actually help defeat China in any future war.
Top line: If America wants to be ready to fight and win a war with China over Taiwan, we better start acting in that pursuit. If not, we better mentally prepare ourselves to lose the most politically defining war of the 21st century.
Tom Rogan is an online editor and foreign policy writer for the Washington Examiner.
