A Closer Look at the Factors Driving the U.S. Debt

The United States national debt has been rising for decades, reaching unprecedented levels in recent years. 

As of February 2023, the U.S. national debt stood at over $31 trillion. With such a massive debt burden, it’s critical to understand the factors driving this trend. 

In this article, we will look at the key factors contributing to the U.S. debt and explore how they impact the economy and society.

Government Spending

One of the primary drivers of the U.S. debt is government spending. The federal government provides numerous services, including defense, infrastructure, social programs, and more. 

However, many of these services require significant resources to operate, which can drain the government’s finances. The more the government spends on these services, the greater the debt burden.

One area of government spending that has received a lot of attention in recent years is defense. The United States spends more on defense than any other country. 

In the fiscal year 2022, the Department of Defense’s budget was $817 billion, representing a significant portion of the federal funding. While national security is a critical priority, critics argue that the government could reduce defense spending without sacrificing safety.

Social programs are another crucial area of government spending. Programs like Social Security and Medicare provide critical support to millions of Americans. 

However, these programs can also be expensive, particularly as the population ages, requiring more healthcare and retirement benefits. In 2020, Social Security alone accounted for 21% of the federal budget, while Medicare accounted for 13%.

Read more about how the United States’ debt provides leverage to its adversaries by international politics writer Amir Handjani.

Tax Policies

Another factor contributing to the U.S. debt is tax policies. Taxes are a critical source of revenue for the government, providing the resources needed to fund government services and programs. 

However, the tax system is complex, and tax policy changes can significantly impact government finances.

The main types of taxes contributing to government revenue include income tax, corporate tax, and excise tax. Income tax is the largest source of federal revenue, accounting for approximately 50% of the total. Corporate taxes provide a smaller but equally significant portion of revenue, accounting for about 10%.

Over the years, there has been much debate about the optimal level of taxation. Some argue that lower taxes encourage economic growth and investment, ultimately leading to higher revenues. 

Others argue that higher taxes are necessary to fund vital government programs and services. The debate over tax policy will likely continue to be a hotly contested issue.

Entitlement Programs

Entitlement programs are another critical factor driving the U.S. debt. These programs, including Social Security, Medicare, and Medicaid, support millions of Americans who would otherwise struggle to afford healthcare and other basic needs. 

However, the cost of these programs has been increasing in recent years, leading to concerns about their sustainability.

One of the biggest challenges facing entitlement programs is demographic change. 

As the population ages, more people are eligible for Social Security and Medicare benefits. The increasing costs of these programs further strain the government’s finances.

Economic Downturns

Finally, economic downturns can also be a factor driving the U.S. debt. Government revenues tend to decline when the economy enters a recession, as businesses and individuals earn less income and pay fewer taxes. 

At the same time, government spending tends to increase as more people require support from programs like unemployment insurance and food assistance.

During a recession, the government may use deficit spending to help stimulate the economy. Providing additional support to struggling businesses and individuals requires borrowing money. 

While deficit spending can be helpful in the short term, it can also contribute to the national debt in the long haul.

The COVID-19 pandemic is a recent example of how economic downturns can contribute to the U.S. debt. 

The pandemic led to widespread business closures and job losses, reducing tax revenues for the government. 

In response, the government passed several stimulus packages, including the CARES Act and the American Rescue Plan, which supported individuals and businesses impacted by the pandemic. 

While these packages helped provide much-needed relief, they also added to the national debt already at record levels.

Final Thoughts

Understanding the factors driving the U.S. debt is critical to ensuring the economy’s and society’s long-term stability. 

Government spending, tax policies, entitlement programs, and economic downturns all shape the debt landscape. However, addressing the debt requires more than just identifying its drivers. 

It also requires policymakers and citizens to consider balancing the need for government services and support with the need for fiscal responsibility. 

Ultimately, the solution to the U.S. debt will require a concerted effort by all stakeholders to make difficult decisions about spending, taxes, and entitlement programs. 

The future of the U.S. economy and society depends on our ability to find sustainable and equitable solutions.