Budget impasses are now routine. Fixes are within reach.

In the time it takes to read this sentence, the U.S. national debt will have increased by more than $100,000. It’s now a record $34 trillion. Within just three years, the United States is on track to be spending more on interest than on its entire military.  

Yet Congress, which holds America’s purse strings, remains gridlocked over how to address the nation’s finances. Budget discussions have become prolonged messaging affairs, with Democrats calling for higher taxes on rich people and Republicans proposing deep spending cuts – and real compromise increasingly elusive. Congress hasn’t approved a budget on time in a quarter of a century. And it’s been nearly that long since the U.S. could show a surplus; every year since 2001, the country has spent more than it brought in, though increasingly there is a sense in some quarters that running deficits isn’t as bad as it was once feared.   

Now, lawmakers look likely to kick the can down the road again, for the third time since the new fiscal year began on Oct. 1. GOP House Speaker Mike Johnson and Democratic Senate Majority Leader Chuck Schumer have agreed to another stopgap funding measure that would give their respective chambers until March to come up with a comprehensive budget, averting a potential government shutdown. The plan could pass the Senate as early as Thursday, though the right-wing House Freedom Caucus is pushing back hard and could threaten Speaker Johnson’s leadership as a result, as happened with his predecessor, Kevin McCarthy. 

Meanwhile, almost no one is talking about the elephants in the room: “mandatory” programs including Social Security, Medicare, and Medicaid, which account for about two-thirds of spending and are not part of the budget process. 

To be sure, today’s Congress is more narrowly divided along partisan lines than it has been in years, if not decades. The institution is gridlocked on nearly everything, not just fiscal matters. But many say there’s a fundamental breakdown that goes beyond the personalities and politics.

“What we’re seeing today is the accumulation of a 50-year shredding of the congressional budget process,” says Brian Riedl, a former GOP Senate staffer now at the Manhattan Institute.

Reform today is much harder than in the 1990s, when lawmakers could leave Social Security and Medicare alone and tweak less-popular programs to close the deficit. Now, any reform will have to tackle those entitlements. And it will need to be bipartisan. 

“The fantasy that someday Democrats will be able to implement their Utopian solution to the deficits or Republicans will be able to implement their own is completely unrealistic,” says Mr. Riedl. “In order to build credibility with the public, any painful reforms will have to involve both parties holding hands together and jumping.”

Models for reform

Other governments have shown it’s possible to turn things around. Sweden, for example, is held up as a model for fiscal reform, after a crisis in the 1990s forced the social welfare state to address its ballooning debt. It now has one of the lowest ratios of debt to gross domestic product in the European Union.

Democrats have long argued that the main problem is Republicans’ unwillingness to raise taxes, particularly on ultra-rich Americans. Sen. Bernie Sanders, a Democratic Socialist who as mayor of Burlington, Vermont, found innovative ways to save the city money and get its finances back on track, blames the “enormous power of the oligarchy.” He argues that America has more than enough resources to fund education and address issues like the housing crisis. “This is the richest country in the history of the world,” he says. 

As of 2022, overall U.S. tax revenues as a percentage of GDP were at nearly an all-time high, just under the 19.8% seen during World War II, according to Federal Reserve data. In the wake of the 2017 Trump tax cuts, however, two economists from the University of California, Berkeley found that the effective average tax rate of billionaires was actually less than that of the working class. 

But even if the total wealth of every American billionaire were confiscated – stocks liquidated, mansions and businesses sold, for an estimated net value of $4.5 trillion – it wouldn’t be enough to run the government for a single year. And it would only cover the budget deficit for a little over two years. 

“My Democratic colleagues would say, ‘Well, if we just tax the rich a little more or if we just got rid of foreign aid over here’ – those are like rounding errors in the scale of the borrowing,” says GOP Rep. David Schweikert of Arizona, vice chair of Congress’ bicameral Joint Economic Committee.

Nearly all U.S. states have some sort of balanced budget rule that prevents them from going into debt like the federal government. And sometimes a myopic focus on avoiding a shortfall can result in deep cuts to education or other services, or in short-sighted decisions like raiding rainy-day funds. 

Richard Auxier, a senior policy associate at the Urban-Brookings Tax Policy Center, says policymakers need to find a middle ground between defending government services and keeping spending – and taxes – under control.

“You need to have someone to say, ‘This is needed; here’s why,’” he says. “But someone else has to say, ‘You can’t just keep turning the revenue knob. I need you to prioritize what you want to do.’”

A bipartisan debt commission?

Lately, the ranks of fiscal responsibility advocates in Washington have thinned considerably, with an increasing number of experts saying national debt isn’t inherently bad. They point out that American households also carry significant debt and argue it’s OK for the federal government to do the same, especially since it can print more money.

As interest rates rise, so would the debt, and at a certain point investors will show concern that it is not sustainable. If they increasingly demand to be compensated for rising risk, that could affect not only government finances, but also the overall economy and individual earnings. Unlike EU member Greece, America has no one to rescue it if it defaults.

When Speaker Johnson gave his maiden speech in October, he called for a bipartisan debt commission to begin work immediately. House Budget Committee Chair Jodey Arrington, a Texas Republican, says Mr. Johnson “is pushing that more than anybody.” This week, the committee is marking up a bill for such a commission after talking with various stakeholders, including Democratic Sen. Joe Manchin, who is co-sponsoring a similar bill in the Senate.

Representative Arrington says it’s crucial for Congress to look at the bigger picture, since annual budget fights tend to focus on just a small percentage of overall spending. Of the roughly 25% of spending that does not involve interest or programs like Social Security, nearly half goes to defense. That leaves roughly 12% of spending for Congress to haggle over. 

“It’s inordinate how much time we spend on what is a relatively small part of the federal budget,” Mr. Arrington says. “And it is not the part of the budget that is going to put our country in a catastrophic and irreparable debt crisis.”