Debt and Divides: U.S. Short on Leadership, Not Ideas

This paper is part of an initiative from the Peterson Foundation to help illuminate and understand key fiscal and economic questions facing America. See more papers in the Expert Views: Bipartisan Policymaking under Divided Government series.

By Heidi Heitkamp

Feb 2, 2023

The U.S. debt has risen regardless of administration, and on January 19, 2023, the U.S. hit its debt limit of $31.381 trillion. During the era of low interest rates, total interest cost on the federal debt was not alarming. With rising interest rates, CBO estimates that federal payment on our debt will increase from almost $400 billion in FY 2022 to nearly triple over the upcoming decade, jumping from $442 billion to $1.2 trillion and ultimately $8.1 trillion over that period.

When I started this essay, I planned to outline the real economic consequences of huge deficit spending and present a balanced proposal to tackle and reduce the federal government’s debt and deficit. Then I thought, why add one more essay to the pile of studies that have been written over the past decades on exactly that topic? Simply put, we are not short on ideas; we are short on leadership.

No party, or even individual member, has bragging rights when it comes to advocating for, or making progress on, reducing the deficit and debt. Now that a Democrat occupies the White House, House Republicans are demanding a rapid decrease in deficit spending, even threatening to not raise the debt limit unless their demands are met. Democrats respond that these Republican leaders were complicit or actively involved in approving the Trump administration spending that is responsible for 25% of today's total nation’s debt: “You raised the debt when you were in charge, so we get to raise the debt when we are in charge.”

At the same time, many Democrats refuse to acknowledge that the debt is a looming critical problem and to solve it we must be serious about raising revenues and cutting spending — raising taxes on the wealthy will not alone solve the problem. Democrats have rightfully expressed concern about the disproportionate economic burdens borne by communities of color and centered those concerns in their economic agenda. That makes it sadly ironic that the party does not seem too concerned about the inequity of passing on massive debt and interest costs to the next generation of Americans which will be majority minority. The Urban Institute has sounded the alarm, reporting that by 2024, the federal government will pay more in interest than spending on children. As my friend Senator Byron Dorgan says, “We (the baby boomers) have inherited from our parents and borrowed from our kids.”

No one should be fooled — reducing debt and deficit has no honest, consistent political champions.

The real challenge is achieving a bipartisan agreement that the solution must be balanced. It is the height of irresponsibility when a Republican member takes a pledge to never raise taxes, votes for deficit spending, and then votes to lower the tax rates with the promise that the tax cut will “pay for itself.” It would be like an average American saying I am going to quit my job, put all my expenses on a credit card, and when the bill comes due, refuse to pay. For their part, Democrats refuse to look at any spending cuts, in either entitlements or discretionary spending, never acknowledging the lost spending opportunities when 25% of our discretionary spending goes to servicing our debt.

State and local governments are also to blame. The hypocrisy of governors, particularly red state governors, pounding the table about fiscal responsibility at the same time they have taken and spent massive federal dollars is head spinning. State budgets are fat with revenue because of pass through pandemic federal spending. Fiscal hawks argue that governors balance their budgets, why can’t the federal government? They conveniently ignore state bonding (aka debt) and that, on average, 32.6% of state spending comes from the federal government. If states were only spending what they collect in revenue each year, state budget surpluses would evaporate and many of those budgets would be in deficit. Governors need to stop bragging about their budget surplus and start telling the federal government what federal dollars they are willing to forgo to solve the debt problem.

The American people must also assume some responsibility. Where 75% of Americans express concern about debt and deficit, the debt and deficit has not risen to a major voting issue. In voters’ defense, they have not had good candidate options. If they voted for an incumbent, they voted for someone who voted to raise the debt. When voters make deficit spending a primary voting issue and refuse to vote for any elected official who has not taken action to stabilize America’s debt, the debt will get addressed.

So, what is the fix? First, you can’t fix a problem you will not admit you have. Step one is to get a majority of members to admit that we have a serious problem and that they are going to take responsibility to fix it. If a member does not believe the debt is a problem, join the argument. Have a debate. That is what the American people want to see. Instead of standing up on the floor of their respective chambers with a chart and a rant, publicly engage with each other.

Second, identify the right leaders. In every aspect of life, personal relationships matter. A small team of serious legislators who have a proven record of legislative successes and who are respected for what they know, as well as trusted and “true to their word,” can overcome even the most serious partisan hurdles. You have all heard of a legislative “gang” like the bipartisan Gang of Eight that came together in 2013 to address immigration reform or the Gang of 20 Senators who came together last year to pass bipartisan gun reform. These groups usually get started with two members from either party and members are added as interest is expressed. They typically are successful when no one yacks about the deliberations, and no one tries to take undue credit. We need a group of serious legislators who are committed to prioritizing deduction first of the deficit, which will then lead to long-term debt reduction.

Third, set realistic expectations. In legislation, perfect is truly the enemy of good. On rare occasions, and usually born of necessity, big legislation can pass. But it is rare. When Democrats passed the Affordable Care Act aka Obamacare, they had to scale back from single payer or a public option. When Republicans passed the Tax Cut and Jobs Act aka the Trump tax cuts, they had to sunset several provisions early to make the numbers work. Even in the case of two major bipartisan victories from the last Congress, the Bipartisan Infrastructure Law and the CHIPS Act, members had to give ground on what was paid for and how. Incremental progress is preferable to no progress. There is a mindset that if legislation passes that does not address every concern and doesn’t fix the problem tomorrow, the legislation is not worth doing. Climate legislation is a perfect example. During my time in the Senate, two most significant ‘climate’ bills were the long-term extension of the production tax and investment tax credits, which led to an explosion of investment in renewable energy and the reform of 45Q tax credits for carbon capture. Most climate activists believed these efforts to be modest at best, but both provisions, which were the product of compromise, had a very positive climate effect. If you wait around for perfect legislation to pass, you will be waiting a long time, but more importantly you will miss an opportunity to do positive incremental things.

Fourth, if you want bipartisan legislation to pass in a divided Congress, stay away from cultural and ideological issues. There are three categories of legislative issues: the easy, the impossible, and the hard. Veterans’ issues, like burn pits or Gold Star family benefits, or spending on disaster assistance tend to be bipartisan issues that are easier to come to consensus around. Where it is true that progress on these issues sometimes appears difficult, every insider knows that eventually consensus will be achieved, and legislation will pass. The “impossible” are things like agreement on federal funding of abortion services or a nationwide ban on assault weapons. Impossible issues are just that because they are part of the seemingly intractable American cultural and ideological divide. This political divide fuels small dollar donations, which have become an essential component of political campaigns.

The “hard” issues are in the sweet spot. These are issues that every rational legislator privately acknowledges need to be addressed, like immigration and border security, and federal budget debt and deficits, debt limit, rising health care costs, securing Social Security for future generations and climate. Tough, but not impossible.

Fifth, do not let the issue get hijacked by a minority of legislators who will not compromise because the issue is too politically valuable, and compromise does not sit well with the extreme part of the political party base. After the Republicans failed to secure a majority in the Senate, Sen. Rick Scott blamed Republican Leader Mitch McConnell arguing that McConnell “caved in on the debt ceiling, caved in on a gun bill, caved in on a fake infrastructure bill.” In Scott’s judgment, all that compromise caused the Republican’s political failure. To his credit, in his 11-part plan, Scott was willing to tell the voters what agenda a Republican majority would advance. McConnell, a savvy politician, knew Scott’s plan was a nonstarter for independent voters, hence the conflict. This dialogue is a distraction.

On the Democratic side, the best example is Build Back Better. For months, the legislation stalled because the left wing of the Democratic Party could not take Sen. Joe Manchin’s “no” as the real answer. Eventually, time grew short, and the Manchin-lead Inflation Reduction Act was advanced into law. That legislation became the foundation of many Democratic campaigns, because in the end good was not the enemy of perfect. Unfortunately, this compromise legislation was a single party compromise.

Finally, it is essential that reducing debt and deficit is a national election priority. When you move and engage the voters to put an issue at the top of their voting list, politicians pay attention. This will not be easy. Federal spending is popular, whether it is spending on a Farm Bill in rural red America or spending on mass transit in urban America. Creating a public environment that demands change and embraces compromise is particularly difficult when the issues are not the Fox News/MSNBC headlines for the day. Getting and keeping the public’s attention on a non-red meat issue takes leadership and hard work. But it can be done.

To end on a hopeful note, at the World Economic Forum in Davos, Switzerland, Sen. Joe Manchin and Sen. Mitt Romney were honored for their work on the TRUST Act. The bill would establish a “rescue committee” for every endangered government trust fund — like Social Security, Medicare and highway trust funds. Each rescue committee would be composed of three members from each side of the aisle and would be responsible for creating policy pathways for solvency. The bill has yet to be introduced this Congress but could be a start of the bipartisan path forward our country needs to address our growing political divide and debt.

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About the Author

U.S. Senator Heidi Heitkamp served as the first female senator elected from North Dakota from 2013–2019.

During her six years in the U.S. Senate, Heitkamp quickly became a proven negotiator who worked across the aisle to fight for rural America. She personally showed that if senators work together, it can lead to real solutions. Throughout her time in the Senate, Heidi prioritized improving the lives of Indigenous people and working families, stopping human trafficking; guaranteeing affordable health care; addressing childhood trauma; eliminating unnecessary regulation; and securing an energy policy that keeps cost low but achieves climate goals. Providing equal economic opportunity to Rural America continues to be her lifelong pursuit.

Heitkamp previously served as North Dakota’s Attorney General, and elected state Tax Commissioner. She serves on numerous boards including The McCain Institute, The Howard Buffett Foundation, Restore Democracy Initiative and The German Marshall Fund. She is the founder and Chair of the One Country Project, an organization focused on addressing the needs and concerns of rural America. Heidi was recently named the Director of the Institute of Politics at the University of Chicago, a university she has long been committed to and a place where she enjoys engaging with students over civic discussions while encouraging them to seek opportunities in public service to our country. Heidi also serves as a contributor to both CNBC and ABC News.

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