Verify: Can the national debt be paid off?
Under President Donald Trump’s tax plan, companies now pay fewer taxes. Some are passing the savings along to workers by giving bonuses. Walmart even raised its minimum wage to $11 and credited the president.
But that tax cut comes with a price. The Congressional Budget Office estimates it will add 1.4 trillion dollars to the national debt.
That got Verify viewer Renee McElheney wondering: “Is there ever any true expectation that the debt can be paid in full?”
To answer that, I'm looking at the history of the national debt and talking to economist Harvey Rosenblum. He's a finance professor at SMU and former Executive Vice President for the Federal Reserve Bank of Dallas.
"Is there ever any expectation that the debt can be paid in full?” I asked Rosenblum.
“Not a realistic one. It could happen, but it's not likely to happen. Just the nature of governments in this day and age. Not just the United States government,” said Rosenblum.
In fact, historical data, from the U.S. Treasury, shows America has not been debt free, since the Great Depression.
“What are some good reasons to run a deficit and borrow money, for a government?” I asked.
“A government has commitments to honor,” he said.
Commitments like covering the cost of social security, paying military salaries or keeping the courts open.
Interest rates for the U.S. government are incredibly low. So, in lean economic times, it tends to borrow more to cover costs.
“How much money is paid toward the national debt?” I asked.
“In recent years, none at all,” Rosenblum said.
There was a time in late 90's and early 2000’s, under Clinton and Bush, when times were booming and the nation did chip away at the debt. But that stopped when the economy slowed. Now we owe $20.5 trillion
Is it bad to carry debt? The professor said businesses do it all the time.
“It's advantageous, if they want to grow their business, to borrow more when the price is right and when that money can be used profitably,” Rosenblum said.
“Same for the government?” I asked.
“Same for the government,” he said.
So, is there an expectation that the debt can be paid in full? The answer is yes. But as long as the nation can afford to meet its commitments and pay the interest it owes, the answer is no.
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