U.S. debt now equals the whole economy — and tax cuts since 2001 added over $10 trillion

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An analysis of CBO data by the Center for American Progress finds that without these tax cuts, the debt-to-GDP ratio would be decreasing.

Democrats, set to take over Congress with robust majorities, will face at least one expensive obstacle to their policy agenda: a national debt that now equals the size of the U.S. economy.

Clocking in at $32 trillion, this debt-to-GDP ratio of 100% would likely raise alarms for other countries. But it attracted relatively little attention in an election season dominated by concerns over the economy and the cost of living.

Debt has grown to these levels because over the past 25 years, the federal government has been spending more than it collects in taxes. Even as the U.S. economy grew, lawmakers have cut taxes repeatedly, sometimes with bipartisan support, instead of paying down debt.

The series of tax cuts since 2001 has added over $10 trillion to the debt, according to an analysis of Congressional Budget Office data by the Center for American Progress. In fact, without these series of cuts, the debt-to-GDP ratio would be decreasing, the study found.

The debate over taxation often falls along partisan lines, with arguments focusing on which income groups are affected or the potential impact on economic growth. But as a public policy scholar, I believe that important context is often overlooked. Under conditions of strong gross domestic product growth and low debt, tax cuts may have a relatively benign fiscal impact. But today, because debt as a share of GDP is so much higher, and interest rates are steeper, the cost of adding new debt is much greater than 15 or 20 years ago, whether through additional spending or through tax cuts.

I believe Democrats will have to wrestle with this math as they try to advance a policy agenda focused on affordability that minimizes the risk of further borrowing.

Proponents of fiscal austerity argue that lower spending should accompany tax cuts so that debt doesn’t rise.

U.S. federal spending, however, has remained relatively flat – outside of emergencies like the 2009 recovery package and COVID-19 stimulus funds – even as GDP has risen.

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