From former Labor Secretary Robert Reich:
Republicans are attacking Biden for expanding the federal debt, and the House “Freedom Caucus” is livid that speaker Mike Johnson has agreed to more funds for Ukraine, claiming it will expand the debt even further.
Can we just have some sanity here?
The federal debt is a problem. This year, the United States will spend about $870 billion, or 3.1 percent of gross domestic product on interest payments on the debt. That’s more than the entire defense budget.
But take a closer look.
The major reason for the huge federal debt is Trump’s and George W. Bush’s tax cuts, which together added $10 trillion to the debt since their enactment. They’re responsible for 57 percent of the increase in the ratio of the national debt to the economy since 2001.
Excluding the one-time costs of responding to Covid-19 and the Great Recession, the Bush and Trump tax cuts account for more than 90% of the increase in the debt ratio.
Most of the benefits of those tax cuts, not incidentally, have gone to the rich. 65 percent of the benefits of the Trump tax cuts have gone to the richest fifth of Americans, 22 percent to the top 1 percent.
And as the federal debt has risen, most of the interest payments on it have gone to the rich, too. Wealthy investors park their savings in treasury bonds directly or indirectly in treasury bonds held by mutual funds, hedge funds, pension funds, banks, insurance companies, personal trusts, and estates.
Decades ago, wealthy Americans financed the federal government mainly by paying taxes. In the 1950s, the top marginal tax rate on the wealthy was above 90 percent. Even including all tax credits and deductions, it was higher than 50 percent.
Since the Reagan, Bush, and Trump tax cuts, though, wealthy Americans have financed the federal government mainly by lending it money and collecting interest payments on those loans -- profiting when the rest of us pay them back.
Which means a growing portion of everyone else’s taxes are now paying the rich interest on those loans instead of paying for government services everyone needs.
So the next time you hear Republicans complain about the federal debt and our swelling interest payments on it, remember that: (1) the debt has grown mainly because of Republican tax cuts, (2) those cuts have mostly benefited the rich, (3) the rich are now the major recipients of interest payments on that debt, (4) and those interest payments are crowding out spending on childcare, elder care, affordable housing, better schools, paid family leave, and everything Americans need.
