As 2025 begins, Americans are expecting meaningful change.
Voters in November demanded a stronger economy and greater government accountability. The most pressing challenge to achieving these goals is our runaway national debt.
Now exceeding $36 trillion — equivalent to $106,647 per citizen — this debt is a burden that stifles economic growth, jeopardizes America’s leadership on the global stage and undermines our strength as a nation.
The question is no longer whether we can afford to ignore this crisis but what will happen if we fail to act.
Think of it in household terms. If you just took out a large mortgage you could barely afford, why would anyone risk giving you a second loan? Well, a second loan would require a high interest rate, which would offset the risk of you potentially not paying it all off.
The same problem applies to our national debt. If the government wants to raise more money, it has two main choices: issue more bonds (at a higher interest rate) or raise taxes. Borrowing more money will result in huge interest payments. Spending money on interest payments limits our spending on good causes.
Let’s go back to the mortgage example. If your monthly mortgage payment takes up more and more of your monthly income, that means you have less money to spend on other things like groceries, gas and family vacations. America’s annual interest payment on our debt is approaching $1 trillion.
What could we spend that money on instead?
Are you concerned about national security? If we spent $1 trillion of annual interest payments on national security, we’d double our defense budget.
What if instead of spending a billion dollars on interest payments each year, we just give that money back to taxpayers in the form of tax cuts? The average taxpayer would save more than $7,000 a year. No matter what your top issue is, our national debt limits our ability to spend or save money efficiently.
America’s global leadership is also at stake. National debt slows investment in our military and risks America losing its power as the global financial leader. Our adversaries are increasing defense spending and growing the size of their military. We need to increase investment in our defense or we will lose much of our ability to deter conflict. Now is not the time for our military readiness to be constrained by our debt.
Similarly, America’s economic power is at an inflection point. Much of our financial influence relies on the dollar being the world reserve currency. This makes it easier for America to borrow money, reduces exchange rate risk and gives us more leverage when imposing sanctions.
Many countries are already trying to displace the dollar from being the world reserve currency, a trend called dedollarization. If America’s debt becomes unsustainable, that makes the dollar riskier and investment in America less attractive, which will only increase the momentum behind dedollarization.
If we solve our debt problem, America will be more powerful abroad and safer at home.
What can we do about it?
Let’s imagine you’re paying off a large credit card bill. You can increase the money you make or cut your expenses. Most likely, you’ll need to do a bit of both. The same logic applies to fixing our national debt problem.
Growing our economy will increase government revenue. America’s GDP needs to grow upward of 4% a year, like it did regularly during the 1980s and 1990s (it was only 2.5% in 2023 and 1.9% in 2022). Lack of revenue isn’t the root cause behind our debt crisis ― overspending is.
The biggest drivers of debt are Medicare and Medicaid ($1.8 trillion), Social Security ($1.5 trillion) and interest payments on debt ($1.0 trillion). As the baby boomer generation ages and lives longer than previous generations, more Americans will depend on Medicare, Medicaid and Social Security.
It is obvious our entitlement system needs to be reformed. Fixing entitlements is unlikely to be politically popular. We will need bold, creative strategies to reform entitlements without harming those currently dependent on them. Time is running out, and we may not have long to solve our debt crisis.
Cutting and reforming government expenditures means less future debt to pay off.
Voters gave Republicans a mandate for change. Now is the time to fix our debt problem, which will make us richer, safer and more prosperous.
Karl Beckstein lives in Raleigh.
