At this moment, with a compromise heading to the president’s desk, the short-term crisis over the debt ceiling seems to have been avoided. But it’s a mistake to allow that sense of relief to mask the reality that while the deal averts the risk of immediate calamity, the trajectory of U.S. debt growth remains ominous.
During the debt ceiling fight in 2011—probably the most oft-cited parallel to the battle that is playing out today—Standard & Poor’s (S&P) downgraded the United States’ credit rating, commenting that “the political brinksmanship of recent months highlights what we see as America’s governance and policymaking becoming less stable, less effective, and less predictable than what we previously believed.”
Since the drumbeat of “the-debt-ceiling-is-coming” media coverage began immediately following the midterm elections, stories and editorials have held up debt ceiling brinkmanship as a leading sign of U.S. political dysfunction, frequently citing the previous S&P downgrade as exhibit A in the potential consequences of a troubled system of U.S. governance.
But saying the downgrade was the result of the messy debt ceiling fight itself tells only half the story. S&P also said it was precipitated by the reality that the agreement to resolve the 2011 row fell short on addressing the bleak U.S. debt picture in coming decades.
In 2011, the national debt stood at about $15 trillion; today, just a dozen years later, it has more than doubled to more than $31 trillion. Debt held by the public was about 65 percent of gross domestic product (GDP) in 2011; today, it’s 93 percent. The longer-term projections are even more dismal: in the next thirty years, that number is projected to climb to more than 190 percent, and entitlement programs such as Social Security and Medicare—which both sides promised not to touch in the current debt ceiling debate—are slated to become insolvent sometime in the next decade.
To be fair, it’s worth noting that some economists have argued that debt doesn’t really matter all that much. Time will tell, but a majority of the American people haven’t bought into that idea yet. President Joe Biden doesn’t seem to believe it either, saying earlier this year that “we’re going to cut the deficit by more than $2 trillion over the next ten years,” misleadingly boasting that he achieved the largest deficit reduction in history, and frequently mentioning the need for fiscal responsibility on the stump. Republicans, who appeared to agree with those debt-doesn’t-matter economists as long as Donald Trump was president, have reverted to “restoring fiscal sanity” as a primary talking point.
While the current debt ceiling agreement does bend the spending curve a bit, in relative terms it represents just a slight reduction in the pressure being applied to the gas pedal. Granted, the deal is probably the best one could hope for given the starkly different positions of the two parties, but it should not be mistaken for a significant effort to bring the nation’s debt under control.
This post was written for the Council on Foreign Relations’ Renewing America initiative—an effort established on the premise that, for the United States to succeed, it must fortify the political, economic, and societal foundations fundamental to its national security and international influence. Renewing America evaluates nine critical domestic issues that shape the ability of the United States to navigate a demanding, competitive, and dangerous world. For more Renewing America resources, visit https://www.cfr.org/programs/renewing-america and follow the initiative on Twitter @RenewingAmerica.