How does the national debt affect the average American?

As of this month, the United States National Debt has topped $39 trillion, that's trillion

with a T, and that big number has major implications for our everyday lives.

This is Cincinnati Edition on WVXU, I'm Lucy May.

The University of Cincinnati's Portman Center for Policy Solutions will examine how the

National Debt affects the lives of Americans during symposium on Monday.

Joining me in this recorded interview to talk about the debt and what it means for all of us,

our former US Senator Rob Portman and Executive Director of UC's Portman Center for Policy Solutions,

Andrew Lewis. Thank you both for being here today.

Thanks for having us.

Yeah, thank you, Lucy.

Senator Portman, as of last week, as I mentioned, the National Debt was more than $39 trillion.

How does that debt affect interest rates?

Well, very directly, and $39 trillion doesn't mean much to any others because it's just so big,

you know, and you just can't imagine these numbers.

But what does matter to us is what we pay for car loans and our mortgage and what the economy does

in terms of higher interest rates, and that definitely is happening because other countries

are less likely to buy our debt, in other words, our treasuries, and certainly not at the percentage

that we would like them to buy that at a lower percentage because they're worried about the

full faith and credit of the United States government and whether this unprecedented amount of debt

can be handled. We did have a debt of 100% of GDP, which is where we are with $39 trillion.

Once before, it was one year after World War II, and it was defense betting and was quickly

reduced, and there was frankly no expenditures on the healthcare front. We have now, including

no Medicaid, Medicare expenditures that were an overhang. So this is uncharted territory,

and it is driving interest rates up already. If you look at the 10-year today, it's higher than it

would be, I think, a couple points, which means that mortgages are affected, which means that

car loans were affected, and so on. So it's already having an effect on our economy, and it's not

just interest rates. There also has an impact on the economy generally on interest rates, for sure,

but inflation jobs, America is standing in the world. Yeah. Professor Lewis, can you talk

more about the everyday expenses tied to interest rates and inflation that are affected by that debt?

Yeah, you can see there's so many different pieces that are affecting our day-to-day lives,

our country's future. I think we should think seriously about, I think retirement security

is tied into this, and healthcare for older Americans who rely on us being in strong fiscal

health, but I also think about the future of young people, and that one of the big problems,

and one of the reasons why we have such growing and maybe cascading debt, is that we have a

generational imbalance with people getting older and living longer, and fewer people at younger

ages who are supporting that. And that means that these younger people, people that we work with

at the University of Cincinnati, they're going to be the ones having to deal with this potential

crisis. And so it's everything from home loans and car loans to investments that we can make in

businesses and education, that if we're servicing our debt payments with such a big percentage

of the money that we take in, in fact, more than what we take in, we're borrowing, right,

for I think 14% of our expenditures are going to pay interest on the debt every year, which is as

much as we pay national defense, in fact a little bit more than what we pay, and then a defense budget,

that that is impacting money that can't go elsewhere, can't go to places like infrastructure,

and education, and healthcare, where I think people really want it to go. So this is the challenge

we're facing. I think we have the ability to improve the situation, but if we don't take

steps to make those improvements, we're going to be in real trouble, and it's better to deal

with it now than in a significant crisis. I definitely want to talk about some of those solutions

a bit later in the conversation, but I want to make sure everybody understands all the different

impacts that this debt is having. Senator Portman, you referenced Medicare and Medicaid.

What about the safety net programs that Americans count on? I'm thinking of Medicare and Social Security,

specifically, how does the national debt affect those? Yeah, very directly. Professor Lewis said

it well in terms of diverting money toward paying interest on the debt instead of going into

programs that matter so much to American people, but it's also about these so-called entitlement

programs. So if you look at Social Security, as an example, it is funded by all of our contributions,

fighting contributions, and there is a trust fund, that trust fund actually goes belly up,

meaning that it goes into the category where it cannot be rescued without an influx of either

general revenues or some change to the program. And that happens really soon, some say 20,

33, some say 20, 34, but it's right around the corner. And when that happens, there will be an

automatic reduction in people with Social Security benefits by about 24 to 26 percent, depending

on whose analysis you believe. And so think about that. I mean, it's impossible that Congress would

allow that to happen, in my view, honestly. Probably there'd be huge influx of general revenues

or something, but that's just adds more to the debt and to the interest payment. So it's a real

concern. And when you pull young people and say, do you think you're going to have Social Security,

they generally say no. And this is why, because there's Martin to figure this out, that it's a

pay-as-you-go program, and with fewer people paying in and more people retired, it's in

desperate need of reform. So that's just one aspect of it. Medicare is paid for more out of the

general revenues than it is for the trust fund, but it also has a trust fund. That trust fund

also is going to go install it soon. So yeah, these are serious problems that we have to face as a

country. And again, the sooner you do it, the better, because you can make relatively small

changes now that as an example would not affect anybody in retirement, or maybe nobody even near

retirement, but for younger people would make certain adjustments to be able to ensure that

the program will be around for them and for their kids. Professor Lewis, is the US on the

brink of a fiscal crisis? I mean, what's the risk that we could default on the national debt?

I don't know that we would default exactly. I mean, I think there's potential for that,

but I think the biggest crisis would be you have some sort of outside shock, which

alters the confidence in the US treasury market and bond markets. The interest rates would go up

as a result of that and that would have a series of cascading problems. For example,

we would have to our payments have on the debt go higher because the rate that we're borrowing

is increasing, which would require either pretty significant cuts in certain programs or significant

tax raises that would probably lead to equity sell-offs than you're talking about a significant

recession and downturn. So all it would take is a certain types of risk or certain types of outside

event or confidence shocks that could really lead to some potential cascading effects, like we're

at the level where we potentially could be at some of these tipping points. And so that's why you

want to deal with it. You don't want to have a domestic or international event, trigger something,

a credit market event, trigger something, and then you'll lead to we saw the great recession of

2008, give or take, that could be small in comparison based on the level of debt that we're

carrying now. And so we want to head that off in advance. We want to avoid those things. And so

this is why we're trying to draw attention here. I mean, I work with a lot of people who are

18 to 22 and like you, they don't think about $39 trillion worth of debt, but we want them to know,

hey, this matters for you, right? The you're the generation that this potentially could fall on.

And so let's take some serious looks at this and let's demand of our elected officials that

we get this under control. Senator Portman, if those triggers were to happen, if that cascading

effect were to happen that Professor Lewis was just describing, it seems like that could affect

not only the U.S. economy with the world. I mean, what would the broader implications of that be

across the world? Well, the U.S. economy is the biggest market in the world and we are key to

the global economy, you know, and right now interest rates are relatively high here in this

country and that hurts us, but it also hurts the global market. By the way, the global economy is

expected to grow 2, 3 to percent next year, something like that and we're expected to grow maybe

1 or 2 percent. So there's growth, but it's anemic and it's not what it needs to be to build,

give people more opportunities in life. The other part of this, it's interesting, is how quickly it

can happen. And I have a friend who was a bond trader for a while and he says, you know, Rob,

what you guys in Washington don't realize, I reminded him not Washington anymore, but is how quickly

that bond traders can move the market. And it has happened in the past where rates have gone up

quickly. And you know, these bond vigilantes come in and try to make up percent on the higher rates,

too. So it's sort of snowballs. So we have to be careful of that. And I think again, we kind of

get used to this idea of $1 trillion deficit this year again, plus and $39 trillion debt,

we're doing okay. But we're not doing as well as we should be already because of this because

it's taking, it's sapping energy from the economy. No question raising interest rates, making

inflation more problematic, you know, reducing investment in the United States because of it.

But this possibility of a, you know, a catastrophic event that might trigger the bond market to

move very, very quickly is something that we need to take into account. The credit rating agencies,

by the way, don't like the U.S. debt frame, but you probably noticed this, they continue to

downgrade our debt. That's one reason we have higher interest rates is because, you know,

they're telling the world, hey, this is getting kind of scary. So that's something to watch as well.

We're talking this recorded interview about the national debt and how it affects us all.

Well, let's start talking about solutions. Center Portland, what is the solution? How do we get out

of this hole we've dug for ourselves? Well, I said earlier, there are certain things we could do now

that would begin to write the ship and would make a big difference without hurting people who are on

Medicare, let's say, or so securities we talked about. But bottom line is I've come to the point

where I think Congress is so dysfunctional with regard to budgets and with regard to spending in

taxes. And you see it right now with DHS not being funded and you've seen it over the last year

with the longest shutdown in American history. Those are all budget issues, you know, really not

getting the appropriations bill done on time. This year we were, the ones we did get done, we were

five and a half months late. So Congress is not demonstrated its ability to work on a bipartisan

basis to solve even smaller problems. So I've come to the conclusion that I think it needs to be

taken out of Congress somehow. And there's an idea that comes out of some previous successes,

including where we shut down military bases at one time, so-called BRAC process, where you have

an outside commission made up of experts, some members of Congress but also some experts

objective nonpartisan experts. And they come up with a solution and take it to Congress and say,

you know, here's a fair way to solve this issue. Let's have a vote up or down. So it's not

amenable. It's not something where you can say, well, I like this, but not that. You have to kind of

be willing to support the whole package. This has not been tried with regard to debt and deficit.

It was under Simpson Bulls, which was a previous commission, by bipartisan commission, which

included members of Congress and experts, but it didn't have any status or a basis. So it didn't

have the requirement that it be taken up under expedited procedures or taken up for a down vote.

And frankly, it was the Obama administration that put it together and President Obama rejected

through recommendations when it came out. So it really didn't have a lot of legs. But when it was

taken to the Congress to take a look at, there was no forcing mechanism. So I think what you have

to have, in my view, is an outside commission made up of members of Congress and experts that

looks at this issue cautiously, carefully over time, maybe a year or so, and comes up with balanced

recommendations across the board. It says, how do you have saved those security from bankruptcy?

How do you, you know, save Medicare? But also, how do you deal with defense spending? How do you

deal with the revenue side? How do you deal with the discretionary spending? We bring a lot

about waste fraud and abuse right right now. There is plenty of that to get at. So it would be a broad

set of recommendations and then Congress would be required to take it up in committee and then for

a yes or no vote on the floor of the House and the Senate. And it might fail. And that's okay.

The American people, you know, would have spoken through the representatives, but you would hope that

there would be an educational process at a minimum as part of this. And that would lead to,

you know, taking some tough votes and beginning to get us on the right track. It's not going to happen

quickly. Everybody knows that I think now. There is a proposal that just was introduced in the Senate.

There are five Democrats and five Republicans who introduced it. And I think it has this going to

100% of GDP debt by something like 20, 39. So that's not soon and it's not a balanced budget,

but it's a good step in the right direction. And that's what I think is going to be required.

I know it's a lot more complicated than this, but for for the average person, I think it seems

like it comes down to raising taxes and or cutting spending to reduce the national debt.

I mean, something's got to give. I'll start with you, Professor Lewis, do you think there's

the political will in Congress to do either or both of those things?

I think part of the challenge is that I think you're probably going to have to do both.

And some capacity, you have to raise revenues and cut spending. And in part because you're going

you need to have buy-in from from people in order to get enough votes to make this happen. So you

need people to have both revenue and cuts on the table. And right now, everyone wants to push

the plan that sounds best to their constituents that elect them and their primaries. And I think that

that is not conducive to solving this problem. The other thing is, you know, I think Congress is

short time horizon and re-election infacies, not targeting anyone sitting next to me.

He's not running again. That's a good point. I think that doesn't that doesn't set up well for

the right incentives to solve a problem that might face us in the next five or 10 years. And so

maybe longer, hopefully. And so I think that is where that is this is this is what's problematic.

But I do think some of these grand sort of mechanism bargains that things that like a fiscal

commission could maybe broker together so that they didn't have to be debated on the, you know,

the Senate floor or out in soundbites. But that kind of stuff is is a path forward. What that

exactly looks like is the tricky part. I think if we can get some incremental momentum and perhaps

set some deadlines to revisit, you know, let's make some progress and then revisit this again

or tie certain levels of spending to being at certain levels of of the debt and deficit in,

you know, 10 years, I think that would help us, right? And it would help build some momentum like,

hey, the Congress, the executive, they care about this issue. We're working hard. We don't want to

have big impacts on the American people. But we have to address this because we haven't addressed it

effectively for decades. Yeah. Senator Portman, you said earlier, I think you

described Congress as dysfunctional right now based on what's happening and not happening,

depending on the case. Do you think there's the political will, if this kind of commission were

established with this expertise and this deep, careful thought about this very important issue,

do you think there's the political will in our current environment to follow recommendations or

consider them? You know, I certainly hope so. And I think the first several months of the commission,

if it were formed, would be about education, you know, and letting people know what the alternatives

are here. And, you know, folks are concerned about cuts to spending and that's understandable.

They're also concerned about raising taxes. But the alternative, which is some of the scenarios

we talked about earlier, which is our economy going into a tailspin. And even now, you know,

suffering through an economy that's weaker than it should be because of this big overhang of debt

and deficit needs to be considered too. And there needs to be an education process about that.

So people understand what the impact is now it impacts themselves and their families,

their lives, not just 39 trillion, which seems kind of abstract. But car loans, you know, how much

are those going to, they're already high. You know, rates are already high. I mentioned the 10-year

treasury is already high and higher than it should be but for this debt and deficit. The other aspect

to this, Lucy, is that the economy can grow more quickly and we can get more revenue into the

coffers, not from higher taxes, but from growth. And that should be part of any program. We had

a look at this from an economic point of view and say, okay, what could we do? For instance,

you know, regulatory relief we've talked about in permitting reform as an example. Now these

are not going to solve the problem. You can't grow your way out of this problem, but it can help.

And help let people know that this isn't just about them making a sacrifice on the tax

side or on the spending side. This is about getting to see economy moving again in the way that we

all want it to. And if that happens, you know, if you have instead of one or two percent growth

in our economy, but three or four percent growth makes a huge difference in terms of our revenues

coming in. So that's the third part of this that I think the commission needs to look at and the

Congress needs to focus on is how do we get back to our potential and get back to the kind of

growth rates we've had in previous decades? Senator Portman, you were talking about some of the

fights that we've seen and we are seeing in Congress when it comes to funding budgeting. In recent

years, we've also seen fights over whether to even raise the debt ceiling. Do you think there could

be more political battles like that in the future? Yeah, my only reason I like the debt ceiling

vote is that it's in that context that almost every single positive reform has happened that

it's helped to get the debts and debt under control. So it's kind of ugly to go through that

process and of course we've got to pay our debt. You know, we don't we don't want to have again the

full faith in the United States question. We can't have that. But at the end of the day, it forces

Congress to think about this issue and to come up with things like, you know, the Simpson-Balls

Commission, there was something that came out of one of these called the super committee. I was a

member of it. It wasn't so super. But about two thirds of those recommendations ended up getting

passed into law, which were mostly structural reforms, including on the health care issues,

like like Medicare that helped to create some savings. So I think it's nice to have some forcing

mechanism to be sure that Congress actually has to pay attention to this issue and the American

people in the context of a debt limit. I think are also brought into it because they're amazed that

what do you mean? We have a we have a debt that's 39 trillion dollars and we have to increase it.

Insane. So it forces them to think, well, while we do that, let's do something else to help.

And again, that has been a pretty good forcing mechanism. So that's the reason I differ

some of my colleagues who say, this is stupid. Don't ever have this in this vote again.

I do think it's stupid to have the annual funding of the Congress called into question to the

point that we shut down parts of the government. That doesn't make any sense at all. We always

reopen it. We always pay people after the fact for work they didn't do because their agency

was shut down. So it's not good for taxpayers either. So I have proposed when I was in Congress,

you know, every year this notion of no government shutdowns. And if it comes toward a shutdown,

you just spend the money you spent the previous year and maybe cut it by one percent every

few months to give the appropriations committees and others an incentive to actually solve the problem.

But so that doesn't make sense to me. But the debt limit actually has led to some some pretty

good reflection on, you know, what do we do going forward to avoid this debt from escalating?

Professor Lewis, we've mentioned several times that the debt has now topped $39 trillion. That's

an enormous number. How do we get here? Is this spending on military action? Is this COVID spending?

How did we get to this point? Yes. No, I think the biggest thing is

it's compounded structural changes. Anything that's the biggest thing. You have people living longer,

more people at the older stages of their life, and fewer numbers of people at the younger and the

working stages. And so what that means is that we it costs more for things like social security

and Medicare, which I have the two or the biggest drivers of this. Certainly post post

the Great Recession of 2008 and some of the the spending we did to head off that crisis and then

in the COVID era, those that spending has added to the debt and sort of accelerated where we're at.

We also lived off low interest rates for a long time. And when you have low interest rates,

you can handle larger debt load. I mean, you know, I'm a homeowner and if you've started to

search for a house now versus searching for a house five years ago, you realize that your monthly

costs is much different for the same, you know, a similar range of dollar value of a house.

And since a similar situation, when when the interest rate goes up, then our the amount you have

to pay on that, the percentage of your budget is going up. And so when when interest rates rose

lately, that's been a big factor too. And so it's a variety of compounding things. But part of it is

we know we're spending seven trillion a year and taking in five trillion a year give or take.

And that is over time that adds up pretty quickly. So those those those are I think a few of the

main scenarios. You know, it's what's interesting is this is not hasn't been my long

area of expertise. But we've been diving into it at the Portman Center over the last 12 months or so.

And really trying to think about how do you get regular people to care about this? And so that's

a bit of what we're trying to do. What we're looking to do to Monday. And I've learned a lot

from Center Portman because he spent so much of his time thinking carefully about

federal budgets, that deficit growth, all those kinds of things.

Well, Senator Portman, I'm not trying to start a fight, but is one political party more to blame

for this death than the other? Well, as many of my colleagues have acknowledged, this is not a

Republican or a Democratic issue. It's a good bipartisan issue. We're about the right way.

It's one of the few bipartisan things we can all agree on, which is

more deficits and more debt. You asked earlier about COVID spending. I mean, what happened

during the Great Recession was that we did have higher expenditures from the federal government

to deal with a real problem. And that was appropriate to a certain extent. You have to do that.

When COVID hit, we ran into the same issue. And you recall the last big COVID bill was the

thing about $1.9 trillion. And it was after we had just passed one that was bipartisan for $900

million, and we kind of thought, gosh, that's a good start. But that bill, the almost $2 trillion

one that was in the first part of the Biden administration, did have a big impact on the

spending side. And that continues to this day for some of the decisions that were made then

had a longer shelf life. So those were, I think, legitimate times when we needed to increase

spending to make sure people were taken care of. But we went too far. And we dealt with issues

that were not directly related to COVID, but rather just issues that had to do with increased

government spending at a time when we really can't afford it. So I think to your question,

that is part of why we're here today at 39 instead of maybe 38. No, instead of maybe 30,

35 or 36 because we did increase that spending, we've continued it and Republican administrations

and Democrat administrations and the Trump administration as well as the Biden administration.

So we just have to, as we make these decisions, we have to be mindful of the fact that this

does have an impact on the economy. It's not as direct as people might feel a change in their

taxes or a change in their benefits, but it's very real. And it makes us unable to reach our

potential as a country. And then the possibility of a financial crisis, which could be horrific.

So these are all factors that have to be considered. And if they are, I think where you end up

is on a bipartisan basis, we say, okay, what's a path forward? You know, again, we're not going

to do it overnight. We didn't get it overnight. But we have to begin to reduce this deficit

just as you would in your household and your business. Yeah. Or as you pointed out earlier,

Professor Lewis, this kicks the can to the younger generation, right? It's like handing your

grandkids your credit card bill and saying, good luck. That's exactly right. And I think people

of those generations, they already feel like, you know, it's harder to buy a house. There is a

whole variety of the economy is not as in strong position as it may have been for other generations.

And so you're saddling on top of that, these big fiscal problems. And I think people can get

worried. And then this is why we need to draw attention to this issue. It matters for all of us.

It matters for our grandkids, for our kids. So I'm glad we are taking steps to address it

at the Portman Center. And I hope that we can help mobilize some change among the American

public and among our elected officials. Well, I've been talking with former U.S. Senator

Rob Portman and founding executive director of UC's Portman Center for Policy Solutions,

Andrew Lewis. Thank you both so much for your time today.

Thanks, Lucy. Thanks for having us on. Thank you.

The Portman Center for Policy Solutions Symposium called Securing Our Fiscal Future,

developing solutions to tackle America's debt and deficit will be held Monday, March 30th

at Nippert West Pavilion. You can find more information on our website, www.xu.org.

You've been listening to Cincinnati Edition on www.xu. Our producer is Salina Reader.

Associate producer is Harper Carlton. Technical director is Carlos Lopez Cornue.

I'm Lucy May. Thanks so much for listening.