Unless Congress acts to reduce federal budget deficits, the outstanding public debt will reach $20 trillion a scant five years from now, up from its current level of $15 trillion. That amounts to almost a quarter of million dollars for a family of four, more than twice the median household wealth.
. . .As is well-known, our deficit and debt problems stem from sharply rising entitlement spending. Without congressional action, the combination of the automatic spending increase per beneficiary provisions of these programs and the growth in entitlement program recipients as the population ages will cause entitlement spending to continue to rise far faster than U.S. national income and tax revenue.
To address the debt problem, Congress must reform and restrain the growth of entitlement programs and adopt further pro-growth tax and regulatory policies. The recently enacted corporate-tax-reform plan is a good first step, as it sharply increases the incentive to invest and grow businesses, which will increase incomes. The revenue loss, which amounts to about 0.4 percent of gross-domestic product in 2025, is not by itself a budget buster, considering both the offsetting revenue reflow from higher incomes and the far larger long-run entitlement explosion. Moreover, over the next decade, the tax plan maintains or increases the federal tax claim on GDP compared with recent levels.
Taxes alone cannot solve our budget problem. Funding programs as they are currently structured will require high taxes for all income levels, taxes that would sharply reduce economic opportunity and growth, which in turn will make funding entitlements that much harder.
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