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.

It’s all relative

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.

At the same time, each round of tax cuts over the past quarter century has actually gotten smaller over time if they’re assessed as a share of GDP, as a study by the Tax Foundation, a nonpartisan think tank, noted.

President Ronald Reagan’s 1981 tax cuts were the most expensive in history, reducing annual federal revenue on average by 2.9% of GDP, according to the Tax Foundation’s analysis. The next two biggest cuts occurred in 1945 and 1948, when the government rolled back the wartime hikes that helped pay for World War II. President Barack Obama’s 2012 legislation, extending most of the temporary tax cuts passed under President George W. Bush, comes in fourth at 1.8% of GDP, while cuts passed under President Lyndon Johnson in 1964 rank fifth.

Coming in sixth place at 1.2% of GDP: President Donald Trump’s sweeping policy and tax legislation in 2025, which made permanent most of his 2017 tax cuts.

Costly extensions

While the Trump cuts amounted to a relatively small share of GDP, they had a much larger effect on the national debt due in part to the higher cost of borrowing. The original 2017 legislation was projected to increase public debt from 91.2% to 97.1% of GDP by 2027, with an overall 10-year cost of $1.5 trillion. That was based on the assumption the cuts would expire after 2025.

But just like the earlier round of Bush tax cuts, Congress was loathe to let those provisions lapse. In 2025, the narrow Republican majority pushed through Trump’s legislation that extended or made permanent the 2017 cuts.

The Congressional Budget Office, the independent government scorekeeper of legislation, estimated that the 2025 bill would add another $3.4 trillion over 10 years. And it projected that increasing deficits would push debt to 116% of GDP by the end of 2034.

Why deficits and economic growth matter so much

A basic calculation explains when debt stays stable, and when it does not.

If a government runs a “primary” budget surplus – that is, excluding interest payments – and economic growth is higher than the interest rate on government bonds, debt remains stable. The problem for the U.S. is that budget deficits have been growing faster than the economy, while interest payments on government debt are rising as well.

This math explains why the trajectory of economic growth is so important in understanding the impact of tax cuts. When taxes were cut after World War II, the economy was booming, the U.S. carried little debt, and reducing taxes didn’t further add to it. By contrast, government spending ballooned under Reagan, thanks in large part to defense outlays. Combined with lower tax revenue due to tax cuts, the national debt tripled during Reagan’s time in office.

In 2000, the economy was surging again. That was the last time the U.S. took in more tax revenue than it spent and began paying down the debt. President George W. Bush cited this surplus to justify his first round of major tax cuts in 2001, which also drew support from some Democrats.

It remains to be seen how much leverage the results of the midterms will grant Democratic lawmakers in the next two years as they try to enact legislation under Trump. But I believe lawmakers of all stripes will have to confront the hard choices that the U.S. national debt imposes on policy directions going ahead, thanks to a long series of decisions made over the past quarter century.

Hinckley Jones-Sanpei, Public Policy Researcher, University of Denver

This article is republished from The Conversation under a Creative Commons license. Read the original article.