US' runaway deficit should be arrested before too late

The United States is running a fiscal experiment with no precedent in modern history. The federal budget deficit is projected at nearly $1.8 trillion this year, and total debt has surged past $37 trillion.

These are not abstract numbers. They represent an accelerating drag on the economy, a growing burden on taxpayers, and a mounting threat to US global leadership. The warning lights are flashing red. Yet Washington continues to kick the can down the road.

The debate about deficits often gets bogged down in partisan blame. But the truth is bipartisan: Both parties have created the mess. Republican tax cuts in 2001, 2003 and 2017 hollowed out revenues. Democratic commitments to expanding healthcare and COVID-19 pandemic-era spending swelled obligations. Layer on top of that relentless growth in Social Security and Medicare as the baby boomers retire, plus interest rates that are no longer near zero, and the result is a fiscal vise tightening by the year.

There are those who shrug at trillion-dollar deficits, arguing that America can always borrow more because the world wants dollars. It is true that the US still enjoys "exorbitant privilege" as the issuer of the global reserve currency. But that cushion is shrinking. Interest payments alone are on track to hit $1 trillion a year, more than the entire defense budget. That is money not going to schools, bridges or technology investments. And when the next crisis hits — a financial shock, a pandemic or a geopolitical conflict — the US will find itself without the fiscal breathing room it had in 2008 or 2020.

Some argue that tariffs can fill the gap. US President Donald Trump often touts tariffs as a kind of easy-money fix, a way to make foreigners "pay" for America's deficits. But the math doesn't add up.

Even at their peak at the time in 2020 during Trump's first term, tariffs raised only about $79 billion — a drop in the bucket compared with today's trillion-dollar shortfalls.

Expanding tariffs to all imports could raise more, but at the cost of higher prices for American consumers and retaliation against US exporters. That is not fiscal responsibility. That is shifting the bill onto households and undermining US competitiveness.

Arresting the deficit will require hard choices. No serious analyst believes that America can close the gap by cutting waste or hoping for faster growth alone — except perhaps Elon Musk. The numbers are too large. The US needs a three-pronged strategy — reforming entitlement, raising revenues and prioritizing investment.

Social Security and Medicare are the biggest drivers of long-term deficits. Reform must start there. Options include gradually raising the retirement age to reflect longer lifespans, means-testing benefits so that wealthier retirees receive less, and adjusting cost-of-living formulas to be more sustainable. These changes would not be popular, but the alternative is insolvency.

The US cannot tax itself entirely out of the problem, but it also cannot solve it without new revenue. That means broadening the tax base and closing loopholes that overwhelmingly benefit corporations and the wealthy. A modest value-added tax or a carbon tax, phased in gradually, could provide steady revenue without stifling growth. Rolling back parts of the 2017 tax cuts for high earners is also overdue.

Every dollar spent should be measured against its return for America's future strength. Subsidies for outdated industries and bloated defense projects must give way to investments in infrastructure, research and education. The US can no longer afford to confuse spending with investing.

The greatest obstacle is not economics but politics. Both parties fear the wrath of voters. Democrats resist entitlement reform. Republicans resist tax increases. Yet refusing to act now only ensures harsher medicine later. The longer America waits, the more it will be forced to impose sudden, painful austerity instead of gradual, manageable adjustments.

This is not just an accounting problem. It is a national security issue. If the US really wants to preserve its global competitive edge, it must restore fiscal discipline.

The US has faced daunting fiscal challenges before and emerged stronger. But that has always required political courage: Ronald Reagan's willingness to raise taxes after his 1981 cuts, Bill Clinton's 1993 budget deal, the bipartisan reforms to Social Security in 1983. Today, that courage is absent.

The path forward is clear, though difficult: Reform entitlements, raise revenues intelligently, and discipline spending. Tariffs, accounting gimmicks and wishful thinking will not save the US. What will save America is leadership that levels with the American people about the scale of the problem and the sacrifices required.

The deficit is not destiny. It is a choice. And it is time to choose responsibility and accountability as the watchwords of the day.

The author is a nonresident fellow at the Quincy Institute and senior lecturer at the Asian/Pacific Studies Institute at Duke University in the US.

The views do not necessarily reflect those of China Daily.