Yuval Levin, reacting to a Weekly Standard piece by Larry Lindsey, notes that the interest on America’s accumulated national debt could be as much as six times the additional revenue that would be collected by letting the Bush tax cuts for the richest Americans expire:
Over the past 20 years, the average interest rate the Treasury has had to pay on money it has borrowed has been 5.7%. But over the past year, the average rate has been 2.2%. That’s no small difference given the size of our debt.
As Lindsey points out, if the current very low rate continues, and our fiscal policy basically follows the track laid out by the president’s last budget, then the interest on the debt 10 years from now will be a little over $350 billion. If the rate goes back to the 20-year average, however, interest on the debt 10 years from now will be more like $1.15 trillion. Again, no small difference. Indeed, it is enough to make some prominent elements of our deficit debate seem a little ridiculous.
To put that into perspective, our entire national budget – including defense spending, discretionary spending and mandatory spending on entitlements – is $3.54 trillion. If the payments on our national debt went up to $1.15 trillion, thanks to a more traditional interest rate on our financed debt, it would represent a nearly 33% increase in national spending.
Lindsey notes at the Weekly Standard that this $1.15 trillion is six times the revenue that would be generated by end the Bush tax cuts for those making more than $250,000/year and 2.5 times more than the revenue to be gained from ending all the Bush tax cuts.
The increase in annual interest costs in 2015 alone—$557 billion—is nearly six times the additional revenue that is supposed to be collected by letting the higher end of the Bush tax cuts expire, the centerpiece of the current fiscal policy debate in Washington. The increase in interest costs in 2019—$795 billion—is two-and-a-half times the value of all the Bush income tax cuts of 2001 and 2003 that are due to expire.
Keep in mind that this analysis doesn’t take into account major levels of debt at the state level as well.
In other words, we cannot solve our national debt problem through tax cuts. We cannot tax Americans enough to pay for all the spending our national government is doing.
The only solution for our national debt is to simply stop spending.