With interest rates rising, the debt ceiling looming once again, and high-profile issues like tax reform on the agenda, politicians in Washington are finding it harder to ignore the high and rising national debt. However, instead of addressing the issue openly and honestly, too many are resorting to myths to muddy the waters. We confront some of the most common myths with the facts.

1. CHAIRMEN
JUDD GREGG
EDWARD RENDELL
FOUNDERS
ERSKINE BOWLES
AL SIMPSON
STEERING COMMITTEE
MICHAEL BLOOMBERG
PHIL BREDESEN
KENT CONRAD
DAVID COTE
PETE DOMENICI
VIC FAZIO
JIM MCCRERY
SAM NUNN
MICHAEL PETERSON
STEVEN RATTNER
ALICE RIVLIN
SCOTT SMITH
ANTONIO VILLARAIGOSA
ROBERT ZOELLICK
1900 M Street, NW · Suite 850 · Washington, DC 20036 · (202) 596-3597 · www.fixthedebt.org
Fix the Debt Reality Check
With interest rates rising, the debt ceiling looming once again, and high-profile issues like
tax reform on the agenda, politicians in Washington are finding it harder to ignore the
high and rising national debt. However, instead of addressing the issue openly and
honestly, too many are resorting to myths to muddy the waters. We confront some of the
most common myths with the facts.
Economic growth alone will not fix the debt. Although many policymakers are quick to
acknowledge that we need to get the national debt under control, many only mention
growing the economy when asked how they will do it. While economic growth will be
important, it is simply not at all realistic to achieve growth strong enough to fix the debt
by itself.
An aging population means that labor force growth will not boost the economy nearly as
much as in the past. That means that the improvements in productivity required would
be unprecedented. For example, simply preventing the debt from rising as a share of the
economy would require productivity growth to double from the projected pace to levels
never achieved on a sustained basis in modern history. Simply put, counting on economic
growth to be the silver bullet for the debt misses the mark.
Tax cuts will not pay for themselves. Tax reform is high on the agenda, with good reason
since it has been over 30 years since we last overhauled the tax code. Tax reform can play
a major role in fixing the debt by boosting growth and by bringing in additional revenue,
but it has to be done right. That includes paying for it.
Many argue that tax cuts do not have to be offset with increased revenue or spending
cuts elsewhere in the budget because they pay for themselves through increased
economic growth. But the history of tax cuts shows this is not the case. Well-designed tax
reform can definitely improve economic growth, but tax cuts can only pay for a fraction
of their costs through growth. And if a tax cut increases the debt too much, it can slow
growth. Tax reform needs to happen, but it will not help fix the debt if it is not paid for.
Ignoring Social Security and Medicare is not an option. Some politicians have promised
not to touch Social Security and Medicare, but they are doing no favor to these vital
programs. The Social Security trust fund will run out of money by 2034, which will mean
a 23 percent benefit cut for all recipients. Medicare faces a similar financial challenge. The
longer we wait, the more drastic the remedy will need to be.
Social Security and federalhealth care spending, of which Medicare is the largest program,
make up about half of government spending and will account for much of the growth in
spending in the years to come. In order to balance the budget in ten years, which is the
goal for some, the rest of the budget would need to be cut by 30 percent if Social Security
and Medicare were excluded. Cuts of that magnitude would seriously hamstring
important initiatives like education, defense, and support for low-income families.
With debt as a share of the economy higher than it has been since just after World War II
and rising towards unsustainable levels, it is clear that our national debt problem is far
from solved. Instead of falling for myths, we need to rise up and demand real solutions.