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In 1980, when President Reagan took office, America’s publicly held debt reached more than $712 billion (about $2.8 trillion in 2025 dollars), or roughly 25% of annual U.S. GDP. Today, that figure is a little over $30 trillion, or around 100% of GDP. And as the federal debt grew 42 times larger over that span, the economy grew only tenfold. You can’t expand the numerator four times faster than the denominator for 45 years without courting economic danger.
That’s where we find ourselves. The U.S. is at peace and despite President Trump’s claims, there’s no national emergency. And yet we’ve only seen debt as a higher share of GDP during the years of 1945, 1946, 2020 and 2021. Then, Republicans and Democrats knew to scale back. Now, debt explodes during emergencies and continues to grow in peacetime.
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In 1946, after World War II, debt-to-GDP was 106%. It declined to just 25% by 1980, not only because of inflation and economic growth but because of real fiscal discipline. With budgets nearly balanced, the fruits of a booming private sector could actually reduce the burden. Beginning in the Reagan era, discipline gave way to a new normal of chronic budget deficits.
Three forces made the shift possible:
First, and the main cause of the mess we are in, is that the entitlement state became enormous, yet untouchable. The Social Security reforms of 1983 are a rare example of bipartisan structural reform of a major entitlement program in U.S. history. Since then, despite economic and societal changes, the program has never been reformed. Never mind that it faces insolvency and the potential for automatic benefit cuts of more than 20% in 2033. The same is true of our other major debt driver: Medicare. And Medicaid is growing far beyond its original intent.
Democrats, occasionally helped by Republicans, have worked to expand welfare programs meant for lower-income people to those in higher and higher income brackets. The most recent and extreme example is the COVID-era expansion of the Obamacare tax credit to wealthier taxpayers, a significant share of whom enjoy early retirement. The fight over its continuation is what the government shutdown is about.
Second, Republicans discovered that promising tax cuts without offsetting spending cuts was politically painless so long as one claims that they “pay for themselves.” There is one rare and recent exception: this year’s “One Big Beautiful Bill,” which included $1.5 trillion in spending reductions over 10 years to offset some of the tax cuts. It’s not enough, but it’s something. Meanwhile, the Democrats love to claim that debt wouldn’t be a problem if the rich paid their “fair share.” They already do pay an enormous amount in taxes. But the numbers still don’t add up.
Finally, the Federal Reserve, starting under Chairman Alan Greenspan in 1987, learned how to anesthetize the political pain of budget deficits by keeping interest rates artificially low and monetizing debt. Politicians concluded that they could borrow endlessly without suffering political consequences. The problem is that this only works insofar as investors don’t worry that they will be paid back with inflated dollars.
That illusion has vanished. Interest costs have surged from $372 billion annually just a few years ago to nearly $1 trillion today, surpassing what we spend on defense or Medicaid. Within a decade, yearly interest payments are projected to nearly double, reaching $1.8 trillion. Even without new programs, the built-in deficit would keep rising and outpace economic growth. And Washington keeps adding more deficit spending.
This decade’s bipartisan binge has debt on track for 166% of GDP by 2054. I don’t think we will actually reach that point, because inflation will break out and stabilize the debt. That would destabilize the country and inflict enormous amounts of pain and lost purchasing power. So, my point remains: Politicians on the left and right see that the debt is exploding and are doing nothing.
The current politics of this crisis are as bipartisan as its origins. Democrats defend every entitlement and dream up new benefits. Republicans demand more defense spending and still more tax cuts. Both claim that faster growth will somehow erase the arithmetic, but growth alone can’t close a structural gap this large.
Even sustained 3% real annual growth — a questionable assumption given the implications of an aging population and crackdown on immigration — would produce about $4.4 trillion in extra revenue over a decade, while total deficits will total $21.7 trillion.
Don’t be fooled: The debt explosion is not driven by waste, fraud or foreign aid. Nor is it the result of a lack of revenue. It’s the direct result of reckless promises to retirees, the cost of healthcare and an unwillingness to pay the bills honestly. For most of American history, debt fell when wars ended and peace returned. Since 1980, we’ve managed the opposite: peace without prudence and prosperity without restraint.
Veronique de Rugy is a senior research fellow at the Mercatus Center at George Mason University. This article was produced in collaboration with Creators Syndicate.
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Ideas expressed in the piece
The author argues that America’s publicly held debt has grown 42 times larger over the past 45 years while the economy has grown only tenfold, creating an unsustainable trajectory with debt now at approximately 100% of GDP.[1] The author identifies three principal forces responsible for the crisis: the expansion of untouchable entitlement programs including Social Security, Medicare, and Medicaid that have avoided major structural reform despite facing insolvency; Republican political strategy of promoting tax cuts without corresponding spending reductions while claiming they “pay for themselves”; and the Federal Reserve’s decades-long practice of maintaining artificially low interest rates, which enabled politicians to borrow without immediate political consequences.[1] The author emphasizes that interest costs have surged from $372 billion annually to nearly $1 trillion and are projected to reach $1.8 trillion within a decade, now surpassing spending on defense or Medicaid.[1] The author maintains this crisis is fundamentally bipartisan, with Democrats defending and expanding entitlements while Republicans demand increased defense spending and additional tax cuts, with both sides falsely claiming economic growth alone will resolve the structural deficit.[1] The author contends that the debt explosion stems not from waste, fraud, or foreign aid but from reckless promises to retirees and escalating healthcare costs combined with Washington’s unwillingness to address these issues honestly, arguing that even sustained 3% annual economic growth would generate insufficient revenue to close the structural gap.[1]
Different views on the topic
Some policymakers and economists acknowledge the debt challenge while emphasizing that targeted revenue generation strategies could meaningfully address the fiscal imbalance, citing proposals including tariff revenue expected to generate $3.3 trillion over the next decade and visa-based immigration funding mechanisms as viable approaches.[2] These analysts argue that unconventional revenue sources represent legitimate fiscal tools and note that private sector leaders have observed a “greater realization” from the current administration about fiscal challenges and increased “readiness to address” the crisis.[2] Economists have suggested that recent legislative efforts such as the “One Big Beautiful Bill Act,” which included $1.5 trillion in spending reductions over ten years alongside tax cuts, demonstrate a willingness to incorporate spending discipline into fiscal policy.[2] Some analysts welcome these “strange forms of revenue” as approaches that could meaningfully “change the debt picture” rather than relying solely on entitlement restructuring or traditional revenue measures.[2]
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