Representative Ro Khanna (D., Calif.) posted on X to blame tax cuts for the national debt. He said, “We don’t need a fiscal commission to study it. Everyone knows Johnson’s fiscal commission will recommend cuts in Social Security & Medicare. Instead, we need to end the tax breaks for the ultra-rich and make a moonshot investment in American industry.”
According to the left-wing advocacy group Americans for Tax Fairness, the combined wealth of all 748 U.S. billionaires is $5.1 trillion as of September of this year. In fiscal year 2023, the federal government spent $6.1 trillion. That means that if the government confiscated all the wealth from all the billionaires, it would have come up $1 trillion short of funding spending just for 2023. And then there would be nothing left to take to fund any spending in 2024 or any year after that.
The reason a fiscal commission would likely recommend reforms to Medicare and Social Security is that Medicare and Social Security, along with the borrowing they demand, are the root causes of America’s fiscal problems.
As Brian Riedl wrote for Capital Matters in April, Medicare and Social Security spent $649 billion more than they took in in 2023. In ten years, that shortfall is expected to grow to $1.7 trillion. Those shortfalls will require more borrowing, which drives up interest rates and makes the spending even more expensive. “In sum, Social Security and Medicare will drive $116 trillion in budget deficits over the next 30 years, according to CBO data,” Riedl wrote. Nothing else is even close.
The U.S. won’t be able to tax its way out of this mess. Good luck finding someone who wants $116 trillion in new taxation over the next 30 years. Fiscal year 2023 had above-average tax collections as a share of GDP and still saw a $2 trillion deficit. The record from other countries shows that successful fiscal reforms focus on cutting spending, with only modest tax increases.
The U.S. is headed toward the mother of all fiscal cliffs, at roughly $5 trillion, in 2025. Essentially the entire individual-income-tax code, expanded Obamacare subsidies, state-and-local-government funding, contract authority under the bipartisan infrastructure law, and spending caps from the debt-ceiling deal expire in 2025. Yet politicians continue to demonstrate their unseriousness about the fiscal perfect storm that’s coming.