National debt nears crisis point, budget expert warns

The national debt is approaching a dangerous threshold, and without meaningful action, the financial consequences could be devastating for future generations, says Mike Murphy, senior vice president and chief of staff for the Committee for a Responsible Federal Budget.

Debt Nearly Equals GDP

Murphy’s nonpartisan watchdog group is raising the alarm on the federal government’s trajectory, calling current spending habits “unsustainable.”

“Our debt as a percentage of our economy is almost the entire size of the economy, nearly 100%,” Murphy said. “It's almost your debt would be the size of your income, in some ways.”

Murphy explained that interest payments on the debt have become the fastest-growing line item in the federal budget. If considered a federal program, those payments would rank second only to Social Security in size, surpassing the annual defense budget.

“More on interest payments on the national debt in a given year than we're spending on defense, and that's just going to keep getting worse,” he said.

According to Murphy, the federal government is now approaching $1 trillion in annual interest payments.

He says that about 87% of projected federal spending growth over the next decade will be due to three key areas: interest payments, Social Security, and Medicare.

Foreign Ownership of U.S. Debt a National Security Risk

Another concern is who holds the debt. While domestic institutions hold the majority, countries like China also own hundreds of billions of dollars in U.S. Treasury bonds.

"These countries having our debt is, without a doubt, a risk," Murphy said.

Why Americans Aren’t Sounding the Alarm

Despite these concerns, Murphy said the issue isn’t a top priority for many Americans.

Murphy says there are two reasons why people aren't more worried: it's complicated, and the solutions to this issue are not easy.

Urging Citizens to Take Action

As lawmakers in Washington work through the budget resolution and reconciliation process, which could add up to $7 trillion in new debt. Murphy urged constituents to speak up.

"You need to be telling your delegation the debt is important," he said.

Social Security Insolvency Looms

Murphy also warned that Social Security is on track to become insolvent within six to seven years. Without intervention, beneficiaries could face an across-the-board cut of more than 20%.

"That will really impact everybody on a vitally important program," he said.

He said that when people are shown the data, they become more open to reform.

A Bipartisan Path Forward

The last time the U.S. had a balanced budget was in 2001. Murphy pointed to a combination of bipartisan deals, economic growth, and tough choices in the 1990s as the driving forces behind that surplus.

“George H. W. Bush ... worked with Democratic Congress ... what he did was do a bipartisan deal that had some spending cuts, some tax increases, some budget process reforms to kind of try and keep things in control, ” Murphy said. "(It would) require tough choices, sacrifices, both parties, holding their hands and doing the things that are right and setting up and showing leadership is what it's going to take.