COMMENTARY: The tyranny of federal debt must pass

The Trump administration and Congress have struggled mightily to pass a budget bill that could stop the flow of red ink. At the same time, 42 million former students are now required to start paying off $1.77 trillion in government-funded student debt.

There is no doubt about it: The tyranny of debt is alive and well.

Still struggling in the Senate, despite their efforts, our political leaders have been unable to avoid passing another deficit-laden budget bill. According to Penn/Wharton estimates, the House bill under consideration will generate $2.8 trillion in additional debt over the next 10 years. The Congressional Budget Office estimates a deficit that would range from $2.5 trillion to $4 trillion across those years. Of course, there is more to consider.

Some argue that DOGE spending reductions and tariff-generated revenues can make a big difference. Indeed, the CBO estimates that tariffs could generate as much as $2.8 trillion across the next 10 years, even though they are implemented by executive order instead of legislation and thus subject to a sitting president’s whims. Concern about deficits continues.

Just out-the-door DOGE director Elon Musk is sharply critical of the budget bill. He sees it as undermining his efforts to reduce government deficits and debt and calls the latest version a “disgusting abomination.” President Donald Trump, not at all pleased that Musk has become a megaphone-equipped, outspoken critic, has threatened to eliminate subsidies that support Musk’s Tesla sales and federal contracts that support Musk’s enterprises.

While these two titans tussle, one thing is sure. It’s a whole lot easier to borrow money than pay it off. The pay-off struggle constrains the ability to pursue happiness long after debt-enabled happy times have come to an end. The interest rate clock never stops ticking. Debt is a tyranny.

Just how bad is it? “We, the people” must now struggle to pay off $45.46 trillion in federal debt, an amount that has risen from $19.98 trillion in 2016. The annual interest cost of the debt is the second-largest item in the federal budget, after Social Security, and is running $579 billion thus far in 2025. Unless our government’s habit is controlled, interest on the debt will squeeze out the expansion of government services desired by the public. Of course, the debt has allowed us to consume more than the nation produces, year-in and year-out, every year since 1985. Like a horse and carriage, we have a budget deficit and a trade deficit.

But sadly, as much as Tariff Man Trump argues otherwise, the trade deficit cannot go away by presidential order unless “we, the people” stop consuming so much. So far, the outcome of the current budget battle suggests that consumption may continue. The federal deficit continues to grow.

It is worth noting that the same logic doesn’t apply to paying off student debt. Those in debt may be able to borrow elsewhere to pay their government debt, but by and large, consumption will have to fall while the debt is being serviced.

Much of today’s debt tyranny — for the nation and former students — arose during COVID. The pandemic led the government to exercise the nation’s emergency powers. Federal spending rose 50 percent during the 2019-2021 COVID years. The Trump and Biden administrations opened the money valves and spent trillions to fund stimulus and public health programs. According to a Tax Policy Center analysis, the direct and indirect spending for COVID raised the deficit to 14.9 percent of GDP in 2020 and 12.4 percent in 2021, the most significant shares since World War II.

While COVID spending ended with the pandemic’s passing, the cost of the COVID debt lived on. Assuming a federal interest rate of 3.1 percent, the Congressional Budget Office estimates that in 2033, “the interest payments on the $5.6 trillion in additional debt from the COVID-19 pandemic’s … amounts to about $170 billion per year.”

To accommodate pandemic spending, the Federal Reserve kept interest rates low. As COVID progressed, rules for accessing food stamps and Medicaid were relaxed, and, in March 2020, student debt payments were suspended. Indeed, the Biden administration tried desperately but unsuccessfully to cancel all student debt. Once the pandemic had passed, the stimulus and most emergency health care efforts ended; the nation’s budget managers attempted to resume past habits of passing out pork to their worthy constituencies. However, the tail of past deficit spending came forward, bringing tyranny to old-fashioned pork-barrel politics. Indeed, there was recently strong opposition to passing the Trump budget bill based on the effort to restore food stamps and Medicaid enrollment rules to the pre-COVID standard.

Past debt habits are constraining us. As things stand now, some estimates of 2025 real GDP growth are calling for a pale 1.4 percent, and Morgan Stanley economists predict that student debt payments this year will rise by $1 billion to $3 billion a month and trim 2025 GDP growth by about 0.1 percentage point. Still, “we the people” have little choice but to tighten our belts and pay off debt. After all, America’s bond ratings have been cut for the first time in history, imported goods are being restrained, and interest rates are rising.

It’s time the tyranny of debt ended.

Bruce Yandle is a distinguished adjunct fellow with the Mercatus Center at George Mason University and dean emeritus of Clemson University’s College of Business &Behavioral Science. He wrote this for InsideSources.com.