Common Myths About the Debt

CHAIRMEN
MICHAEL BLOOMBERG
JUDD GREGG
EDWARD RENDELL
FOUNDERS
ERSKINE BOWLES
AL SIMPSON
STEERING COMMITTEE
PHIL BREDESEN
KENT CONRAD
DAVID COTE
PETE DOMENICI
VIC FAZIO
JIM MCCRERY
SAM NUNN
MICHAEL PETERSON
STEVEN RATTNER
ALICE RIVLIN
SCOTT SMITH
ANTONIO VILLARAIGOSA
ROBERT ZOELLICK
1900 M Street, NW · Suite 850 · Washington, DC 20036 · (202) 596-3597 · www.fixthedebt.org
Common Myths About the Debt
Our national debt is on an unsustainable course. It is currently nearly twice the historical
average and on track to grow even greater unless Congress acts. Below, we tackle some
common misconceptions about the debt.
Myth: Deficit levels are falling and therefore, debt is no longer a concern.
Fact: The era of declining deficits is over. This year, our government will still spend
$590 billion more than it takes in, which is more than $150 billion higher than the
2015 deficit. Deficits and the debt will be on an upward trajectory, with debt on track
to grow by over $9 trillion over the next ten years. Trillion dollar deficits will return
by 2024 and debt will exceed the size of the entire economy by 2033. An ever-rising
debt path will inhibit long-term economic growth, increase the cost of living, leave
the government unprepared for national emergencies, and increase the risk of a
fiscal crisis.
Myth: There is no harm in waiting to solve our debt problems.
Fact: The longer we wait to confront our debt problems, the larger the required
benefit cuts or tax increases will need to be for each individual. If policymakers wait
10 years before addressing the debt, spending cuts or tax increases would need to be
roughly 50 percent larger to reduce debt back to the historical average. Delay means
there is less time to take advantage of compound interest. We will also have less
flexibility to respond to unexpected national emergencies, and it will be harder to
protect the most vulnerable in society from bearing the burden.
Myth: Deficit reduction is just code for austerity, which will ultimately hurt the
economy.
Fact: A comprehensive and gradual deficit reduction plan can replace austerity with
more targeted and pro-growth reforms that promote economic recovery and
accelerate long-term wage growth. For example, the Congressional Budget Office
found that a $4 trillion deficit reduction package would help the economy, increasing
average real income by $7,000 by 2046 compared to an increasing path. (See The
National Debt and You.)

1900 M Street, NW · Suite 850 · Washington, DC 20036 · (202) 596-3597 · www.fixthedebt.org
Page 2
Myth: Deficit reduction will harm low-income and vulnerable populations.
Fact: Every recent bipartisan deficit reduction plan has included progressive reforms that ask more from
those who can afford it, protect low-income programs, and offer new enhancements for the most
vulnerable.
Myth: The debt can be solved by cutting waste, fraud, or foreign aid.
Fact: Foreign aid represents around 1% of the federal budget. And while it is important to address
waste, fraud and abuse of taxpayer money, doing so would only marginally reduce the debt. Even if we
eliminated all waste, fraud, and foreign aid, we would still have not dealt with the long-term drivers of
the debt. Specifically, we need to slow the unsustainable growth of entitlement spending, which
currently makes up over 60 percent of the budget. Mandatory and interest spending will nearly double
in the next 40 years due to population aging, rising health care costs, and projected increases in interest
rates.
Myth: The debt can be solved with faster economic growth.
Fact: Economic growth must be part of the solution, but it can’t solve the debt problem alone. The
amount of growth required would be unprecedented. In addition, many spending programs grow faster
when the economy does, which counteracts the benefits of growth in reducing the debt.
Myth: Taxing the wealthy more will solve the debt problem.
Fact: Our debt problems are too large, and the top 1% too few, to solve the entire problem by raising
taxes on the wealthy. According to the Tax Policy Center, if we wanted to fix the debt only by raising taxes
on those making over $250,000, the top rate would need to be over 100% - a clearly unworkable solution.
Our debt problems are large enough that they should be solved by both tax reform to reduce tax breaks
and spending reform to slow the growth of entitlement programs.

Common Myths About the Debt

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Common Myths About the Debt