President Donald Trump ramped up his personal push for a tax system overhaul this week, making his first presidential appearance at a Senate Republican lunch Tuesday.
But hovering over the tax debate is another significant issue: the national debt. Republicans are facing an internal divide as two central GOP pillars collide — cutting taxes and reining in the federal budget. Here are a few key points to keep in mind as this debate grows.
The issue now: The Treasury Department announced last week that the federal deficit for the last fiscal year (Oct. 2016 to Sept. 2017) was $666 billion. That is the sixth-largest on record.
Quick 101 reminder: the deficit is the government’s shortfall in any given year — money it will borrow to pay that year’s bills. The debt is the accumulation of deficits over time– the total amount the United States owes.
The total national debt: Currently $20,435,639,346,821.03 (As of 10/23.)
And the forecast is dark: Under current policy, the debt is projected to explode by nearly 50 percent, or another $10 trillion, over the next decade. Moreover, the debt is on track to reach 89 percent of the United States’ gross domestic product, or total economic activity, by 2027 — and a suffocating 150 percent of GDP within 30 years.
Why this matters: Too much debt could choke the economy. Both because it would mean punishing interest payments, and because it would change how markets interact with the United States. (And that could affect interest rates for many things, including mortgages.) Right now, the U.S. is coming dangerously close to levels of debt that economists consider unsustainable.
Why this matters now: The budget passed by the Senate last week, and expected to pass the House, would add up to $1.5 trillion to the national debt in order to cut taxes. Republicans argue that those tax cuts will spark economic growth and ultimately lead to revenue increases for the government. That assumption is heavily debated by economists.
It all adds up: Republicans face a critical and difficult policy decision. They long for tax cuts. But they also have campaigned for decades on reducing the national debt. (The current Republican-controlled Congress has added to the deficit, thus far.) It is a fiscal policy Sophie’s Choice. So far, the GOP has chosen shorter-term policy goals, like tax cuts, over the longer-term and arguably more difficult task of tackling the growing debt.