You could pin the US’s staggering $۴۰tn in government debt to Donald Trump’s Keystone Cops-style governance. Tariffs he sold as a new source of revenue were struck down by the supreme court, forcing the government to return tens of billions of dollars to importers. Elon Musk’s “department of government efficiency” (Doge), ostensibly created to stop wasteful government spending, decimated federal programs and probably killed millions of children, but did nothing to close the budget deficit. The burst of inflation following Trump’s misguided adventure in Iran sharply raised the cost of serving the government’s obligations.
Yet as the federal debt hits an all-time high, up from about $۳۵tn when Trump took office less than two years ago, it is worth noting that the US’s gargantuan indebtedness is in fact the product of a longstanding Republican strategy that took shape well before Trump could even dream about gold-plating the White House. It was called “starve the beast”.
One might recall Ronald Reagan’s address to the nation on ۵ February ۱۹۸۱, just two weeks after he had taken office, when he delivered the sad news that “we’re in the worst economic mess since the Great Depression”. Government spending was out of control, he said. The budget deficit the year before had hit ۲.۶% of the nation’s gross domestic product. Federal debt added up to a mind-boggling trillion dollars, a third of gross domestic product (GDP) – the broadest measure of the national economy.
To end the government’s profligacy, Reagan argued, required depriving it of revenue. “There were always those who told us that taxes couldn’t be cut until spending was reduced,” Reagan said. “Well, you know, we can lecture our children about extravagance until we run out of voice and breath. Or we can cure their extravagance by simply reducing their allowance.” And starving the government beast of tax revenue became the goal of Republican economic policy.
Every Republican administration since that speech has taken a machete to the tax schedule, slashing income tax rates for businesses and individuals, cutting estate taxes, and carving out broad tax deductions for preferred constituencies.
What remained unsaid, over nearly half a century worth of tax cuts, was that the ultimate goal of the plan was not really to cure the “extravagance” and fix the government’s finances. It was, instead, to cement the Republicans’ hold on power.
Despite Republicans’ sloganeering, their tax cuts never “paid for themselves” by generating a burst of economic growth. Instead, they borrowed the money to keep up spending. That invariably left Democrats in a budgetary mess to clean up every time they came into office.
Bruce Bartlett, a former Republican policy adviser who worked on a precursor to Reagan’s ۱۹۸۱ tax cut plan, explained the strategy thus: “It’s all part of Republican plan going on for quite a long time to tie the hands of Democratic presidents.” The huge tax cuts in Trump’s signature One Big Beautiful Bill Act (OBBBA) will “make sure the next Democratic president is a complete and total failure”.
History may come to see Trump’s “beautiful bill” as an unprecedented attack on the nation’s public finances. The federal deficit (the annual shortfall when the government spends more money than it takes in) is now running at about ۶% of GDP. The federal debt (the total owed) is running at about ۱۲۳% of GDP, higher than during its peak in the second world war. Last year, paying interest on that debt cost ۳.۲% of GDP, about a trillion dollars, more than was spent on national defense or Medicare.
Destructive though it appears, the OBBBA was just one big step along a path set ۴۵ years ago. Federal government revenues declined as a share of GDP in every Republican administration since Reagan’s. Budget deficits widened every time. The precedent bodes ill for the Democratic administration that seems likely to succeed Trump’s unhinged four years in power.
Bill Clinton’s administration offers the starkest example. Boxed in by a budget deficit equal to ۴.۵% of GDP that he inherited from George HW Bush, Clinton was forced to focus on deficit reduction. “Clinton comes with all these plans and ideas but they all get stomped on,” Bartlett recalled.
Rather than shore up the US’s threadbare safety net, Clinton ended “welfare as we know it”, putting a stop to Democrats’ longstanding commitment to poverty alleviation. He raised taxes, despite their unpopularity, raising federal revenues over his eight years in the White House from ۱۷% to ۲۰% of GDP.
At the end of his term, he bequeathed a budget surplus of ۲.۳% of GDP. His successor, George W Bush, happily spent the inheritance on huge tax cuts that largely benefited the rich.
To be fair, the OBBBA, the latest chapter in the Republican’s fiscal path of destruction, did cut spending – $۱tn-plus from Medicaid and food assistance programs for the poor. But that was no match for $۵tn-plus worth of tax cuts doled out largely to the most affluent Americans.
And this leaves Democrats, again, in a budgetary pickle. If the optimistic predictions come to pass and they win control of both houses of Congress in November and the presidency in ۲۰۲۸, they will arrive into the seat of power with at least one hand tied behind their back.
Ambitious, expensive ideas like Medicare for All or allowances for families with children will struggle, given the ballooning deficits and debt Trump left in their way. Even undoing Trump’s cuts to Medicaid, food stamps and subsidies for health insurance under Obamacare will seem forbidding.
Republicans have never been punished politically for their dismal stewardship of the budget. Clinton, Barack Obama and Joe Biden didn’t gain much from efforts towards deficit reduction. But it won’t be easy for Democrats to simply take a page from the GOP’s playbook. Financial markets are jittery. Rising bond yields alone will raise the government’s cost of servicing the debt, crowding out Democratic spending priorities.
That’s hardly the end of it. Once Democrats are in the White House, Republicans will surely rediscover their long-lost concerns about the government’s lack of fiscal restraint, and do their standard budget hawk cosplay thing to force Democrats to fix the budget.
