Taxes increasingly paying for the past — not the future

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Another Tax Day has come and gone, and with it the end of the 2024 tax season. It shouldn’t come as any real shock that April 15 is not a day most Americans celebrate, with most feeling that either they pay too much or that the system is too complex.

And yet, what truly adds a sour note to Tax Day is that so far this year 39 cents of every dollar paid in individual income taxes is needed to simply pay interest on the national debt. That means we are paying for the past — not the future.

To put that into actual dollars, while Americans have paid $1.1 trillion in individual income taxes in the first half of fiscal year 2024, we have spent $430 billion just in interest on the debt.

The Congressional Budget Office (CBO) published its 10-year projections in February of this year. The CBO projects that debt is on track to exceed its all-time record share of the economy in just four years due to the imbalance between federal spending and tax revenues.

Worse yet, the Social Security and Medicare Trustees warn that the trust funds supporting these vital programs are on the cusp of insolvency within a decade. Accordingly, seniors stand to see a 23% cut in their Social Security benefits in 2033.

Five years ago, we wrote that “on our current path we will one day spend more on interest each year than on the military or Medicare.” Well, “one day” is now “today,” because our interest payments are now eclipsing what we spend on defending our nation and insuring the health of our seniors.

Things were not always this bad. When we served Minnesotans in Congress during the 1980s and ’90s, we put in the hard work of righting the ship. That effort resulted in budget surpluses at the beginning of the new millennium, a concept that seems downright alien today. In fact, back in 2001, America was on track to pay off the national debt within the next decade.

Since that time, the combined impact of various spending increases, several large tax cuts and, more recently, sizable stimulus packages have resulted in a national debt as large as our nation’s entire economic output. As a result, we would need $8 trillion in savings over the next decade just to keep that ratio from getting any worse. More than three-quarters of the debt accumulated in the past two decades, by the way, was the result of bipartisan actions — so neither party is free of blame.

We are far beyond the point where quick and easy fixes are going to cut it, and both political parties will need to have the courage and the will to make real progress happen. But we owe it to our children and grandchildren because paying interest on yesterday’s debt is, in a sense, stealing from them the revenue they need to invest in their future.

As a nation we need to again view fiscal discipline as a necessary commitment toward strengthening our economic vitality, guarding against geopolitical threats, leaving room to respond to true emergencies and creating a fairer future for the next generation.

How do we get there? To put it bluntly, by doing the opposite of what we are doing now. Far too many politicians rail against the debt problem on the campaign trail, only to cower at the hard choices that need to be made when they get to Washington. Of even more concern recently, we have seen some of our top political leaders demagoguing entitlement reforms — and promising not to touch any benefits — despite the fact that the Social Security and Medicare programs will be in financial trouble within a decade.

Before it is too late, all sides need to come together and put everything on the table. No sacred cows. No red lines. That is why the Committee for a Responsible Federal Budget has endorsed a bipartisan fiscal commission to address deficits and debt.

America’s resilience and indomitable spirit have always been key to our nation’s success. The growing debt is an issue of generational fairness. With determination, we still believe it is possible to get our debt under control and make smart investments for a better future.

Tim Penny represented Minnesota’s First Congressional District from 1983 to 1995. David Minge represented Minnesota’s Second Congressional District from 1993 to 2001. Penny is the co-chair and Minge an emeritus board member of the Committee for a Responsible Federal Budget (CRFB). CRFB is providing a program on fiscal matters to the Twin Cities-based Skylight Club on April 17.