With the debt ceiling being raised yet again to avoid a government shutdown, now is the time to address the root cause of the problem. The national debt, a perennial concern for the United States, represents the accumulated deficits incurred by the federal government. Right now, the American public is told that the current national debt is approximately $33 trillion. This is a critical amount of debt with far-reaching consequences, affecting economic stability, future generations, and the overall fiscal health of the nation.

Solving the Problem Requires Addressing its Root Cause

The true amount of the U.S. national debt is in fact much bigger than the conventionally cited amount of $33 trillion. Given the unfunded government obligations and the very questionable low estimates of the budget of the Department of Defense, the current U.S. national debt stands at well over $100 trillion when based on Generally Accepted Accounting Principles (GAAP), which must recognize and account for all liabilities, funded and unfunded. Interest payments alone on this massive debt are now at record highs, expected to reach $1 trillion annually by 2025.

I have always argued that tackling the national debt required a multifaceted approach, including scrutinizing federal expenditures, identifying areas for efficiency, and advocating for responsible budgeting. But first we must recognize the key issue with the U.S. national debt: poor accounting leads to fiscal mismanagement, which gives way to a “credit card mentality.” Ending this credit card mentality in the U.S. Congress may be hard, but it is necessary. As I have said before, “accountability is essential and government accounting must follow GAAP.” Failing to do this is only making the U.S. national debt problem worse and adding the burden of the unstainable debt on to the back of future generations. “Programs favor today’s voters at the expense of tomorrow’s taxpayers,” I have long argued; without the necessary safety guardrails in place in the government accounting system, this will only get worse.

By fostering bipartisan collaboration, U.S. citizens can contribute to the formulation of comprehensive and sustainable solutions to the national debt. In a political climate where ideological differences often hinder progress, it is paramount to underscore the urgency of addressing the nation’s fiscal challenges collectively. Debt makes us poor, and poverty knows no ideology or party, so it affects us all. The path to addressing the national debt is fraught with challenges. Opposition from political rivals, competing policy priorities, and the inherent complexity of budgetary decisions present formidable obstacles.

Lessons to Learn Now

Addressing the national debt is crucial for several reasons, reflecting both short-term and long-term economic, social, and political considerations. Indeed, we need more CPAs running for public office and making their voices heard more often in the public domain. As the first-ever practicing CPA elected to the U.S. Congress, let me share with you some key reasons why it is important for the United States to tackle its national debt successfully:

  • ▪ Economic stability. High levels of national debt can jeopardize economic stability. Excessive debt may lead to increased interest payments, potentially crowding out other essential government expenditures. This can limit the government’s ability to respond to economic downturns through fiscal policy measures such as stimulus spending.
  • ▪ Interest payments. A significant portion of the federal budget is allocated to servicing the interest on the national debt. As the debt grows, so do interest payments. This can result in a situation where an increasing portion of the budget is dedicated to servicing debt rather than funding essential programs and services.
  • ▪ Future generations. Accumulating a large national debt passes on financial burdens to future generations. Excessive debt could limit the government’s ability to invest in education, infrastructure, and other areas critical for the well-being and prosperity of future generations.
  • ▪ Impact on government programs. High levels of debt may force the government to cut spending on essential programs or raise taxes to meet its debt obligations. This can have implications for social services, defense, healthcare, and other areas that rely on government funding.
  • ▪ Interest rates and borrowing costs. A higher national debt can lead to higher interest rates. As the government competes with other borrowers for funds in the financial markets, interest rates may rise, increasing the overall cost of borrowing for businesses and consumers.
  • ▪ Global standing and investor confidence. Excessive debt levels can erode investor confidence and diminish the country’s standing in global financial markets. This, in turn, may lead to higher interest rates on government debt as investors demand greater returns for bearing greater perceived risks.
  • ▪ Flexibility in economic policy. A lower national debt provides the government with greater flexibility to implement counter-cyclical economic policies during economic downturns. Having fiscal space allows for increased government spending or tax cuts to stimulate economic growth when necessary.
  • ▪ Inflation concerns. Although moderate inflation can be a normal part of economic growth, excessive debt can raise concerns about inflation. Policymakers may be forced to make difficult choices between inflationary pressures and implementing contractionary policies that could slow economic growth.
  • ▪ Crisis preparedness. A lower national debt enhances the federal government’s ability to respond effectively to unexpected crises, such as natural disasters, public health emergencies, or geopolitical events. Having fiscal space allows for more robust crisis response measures without exacerbating debt levels.
  • ▪ Long-term fiscal sustainability. Tackling the national debt is essential for ensuring the long-term fiscal sustainability of the country. A sustainable fiscal policy involves balancing spending and revenue to maintain a healthy fiscal position over the long term.

Therefore, addressing the national debt is vital for maintaining economic stability, protecting future generations from excessive financial burdens, and ensuring the government’s ability to provide essential services and respond effectively to economic challenges. It requires a balanced approach that considers both fiscal responsibility and the broader economic well-being of the nation. There is no better way to do this, however, than to follow the rationale behind my argument on ending the credit card mentality by implementing U.S. GAAP standards in the government accounting system.

Joseph J. DioGuardi, CPA, is the president of Truth in Government (https://www.truthingovernment.org), New York, N.Y., and a former member of the U.S. House of Representatives.