The US national debt is not a hard problem to explain. It’s actually a fairly easy problem to explain, but it’s going to take some tough solutions. The cause is that we’re spending a very large amount of money on exactly four things. Almost everything else in the budget doesn’t really matter.

One, health care

It used to be that if you were poor and got sick, you died, and people didn’t really care about the poor. Same goes for the elderly. When you get old, your body gets weak and you start having kinds of health problems you didn’t know were possible. Over the past few decades medicine has gotten dramatically more expensive, and in those same decades we’ve dramatically expanded the amount of health care we’re providing to the poorest and the oldest among us, to the poorest via Medicaid and to the oldest via Medicare. The problem is that in 2024 this cost roughly $1.8 trillion (Medicaid $912 B + Medicare $874 B)¹. I’m not saying we shouldn’t pay for this — we almost definitely should — but if you try to cut health care for the people who need it most, they tend not to like it.

Two, Social Security

Fifty years ago retirees were the single poorest demographic in the United States². There was an internal conflict in the mind of nearly every would-be retiree: With age, the body starts making living and working more difficult, but without the money to retire, at some point one would have to decide they can’t work anymore, and then try their best to live a healthy and hopefully happy life. We had let our elderly down. In the same way that Medicare fixed health care for the elderly, Social Security fixed poverty in the elderly by guaranteeing income in retirement.

Now the problem is threefold:

1. People live a lot longer than they used to; if you retire and die three years later you don’t need much Social Security, but if you retire and die twenty years later we have to support you for a quarter of your life.
2. We’re not putting enough money into the system to match what we pull out.
3. Roughly 73 million Baby Boomers (born 1946-1964) — the largest population boom in American history — are retiring, moving from peak productivity to drawing benefits³.

If we had accounted for this in advance, maybe we would have raised the amount of money you have to put into Social Security over time. As you can imagine, this is not a politically popular decision, and so we haven’t really done it. We never made it so that what you pull out is tied to what you put in; those are two entirely disconnected numbers in the law. Because of this, Social Security is, by most estimates, going to go insolvent in about eight years⁴, and then no more Social Security money, or more likely we’re going to need to print a lot more money. Social Security still costs about $1.46 trillion¹.

Three, interest

When you borrow money you have to pay it back, plus a little prize for the lender. Interest payments have been rising because the debt itself is rising and because we borrowed a lot during historically low rates. We originally had near-zero interest rates to help us recover from the Great Recession, slashed them back to near zero during the pandemic, and only now, while fighting the inflation that cheap borrowing helped create, have we raised them, at the cost of making all the borrowing we still have to do much more expensive. In 2024 we spent almost $882 billion on interest⁵, and as we push borrowing well past $30 trillion that number will climb every year, squeezing the economy as it does. This is what happened to Japan.

Back in the ’90s everyone thought Japan would lead the world economy. People were afraid of Japan’s economy the way they’re afraid of China’s now. Then it just stopped. Japan basically froze and has been frozen since the ’90s or early 2000s, largely because it borrowed huge amounts and now pours a huge share of its economy into paying interest. We are not Japan, and I don’t want us to become Japan.

Four, defense

Defense is hard to buy efficiently because there’s no competition. If General Mills triples the price of cereal you can buy Kellogg’s, but you can’t buy generic bombers. When the one company that makes the war-plane says it costs more, do you say, “That’s okay, we’ll just lose the next war”? No — you bite the bullet and spend it.

We just dropped 14 GBU-57 bunker-buster bombs on Iran’s nuclear program⁶. Developing the GBU-57 cost between $400 million and $500 million, and each bomb costs about $16 million⁶. A hundred of these bombs would cost us $1.6 billion⁶. Spending on groceries has declined dramatically over the past fifty years as a percentage of the average household’s spending, but do you know what hasn’t declined? The cost of defense. Continuing to buy bombs and war-planes is costing us roughly $874 billion a year¹.

There’s the rub

Health care, Social Security, interest, and defense together account for about 74 percent of the budget¹, and if we eliminated every other program tomorrow we’d still be borrowing money just to pay for these four things.

These four things are basically untouchable. You can’t cut health care for the poor or the elderly; you can’t cut Social Security because retirees are now a large, wealthy, and powerful voting bloc; you can’t stop paying interest without triggering financial Armageddon; and you can’t gut defense without risking military Armageddon.

The theory behind Doge was that we spend a substantial amount of the government money we spend on fraud. In truth, more than three-quarters of the dollars we spend are spent on things that are basically politically impossible to remove and logistically very difficult to reduce. Of Medicaid, Medicare, Social Security, interest, and defense, half of these if cut would earn you the fury of the elderly and the poor, both very substantial populations in the United States today, and the other two if cut would see the US face a collapse of the financial system or war.

If you want to understand how the Maslow’s hierarchy of American federal funding works, look no further than the fact that health care gets almost a trillion dollars a year, while transportation gets about $88 billion¹ and education gets only about $305 billion¹. You can live without transportation, but you can’t live without chemo, so of course the government spends a lot more on chemo.

Bonus, taxes

There’s an age-old idea that if only you properly taxed the wealthy, or immigrants, or big corporations, or whomever your least-favorite group is, then all these problems would go away. We’re currently borrowing about $1.833 trillion a year¹. Let’s see what a few of the most extreme tax increase proposals in recent memory would do to the deficit.

Suppose you added a new income-tax bracket for the 1 percent, ten percentage points higher than the current one. The top 1 percent starts around $682,577 in income⁷ and earns about 26 percent of all income⁸. This 10% jump would be a dramatic increase over the lower brackets, as the current jump to the highest bracket is 2% for taxpayers with incomes above $626,350 individual / $751,600 for married couples filing jointly, and then 3% for the next jump down. That surcharge would raise roughly $390 billion⁸, about one-fifth of the deficit.

Try a wealth tax instead. Senator Bernie Sanders’s plan to tax wealth over $21 million at 1 percent would raise about $260 billion a year⁹. Senator Elizabeth Warren’s 2-to-3 percent wealth tax on fortunes over $50 million would raise around $230 billion a year⁹. Helpful, but still nowhere near the deficit.

Perhaps increase corporate taxes by 50%. This would be as radical as any of the proposals above, and would be a fairly pronounced squeeze on small businesses, but with corporate income tax providing $494 billion in 2024, would yield an additional $247 billion¹⁰. Exclude every firm with less than $2.5 billion in assets, and you’re getting an additional $163.5 billion (50% of $327 billion)¹¹.

None of these policies alone comes close to closing the deficit. Fixing the US national debt will, by necessity, squeeze at least one very large group of Americans — the old via Social Security and Medicare, the poor via Medicaid, or everyone via higher taxes.

It turns out the math isn’t mathing because it’s really inconvenient math.