One billionaire's solution to the rising national debt: Raise my taxes
As the U.S. national debt continues to increase, billionaire Douglas Durst, whose father Seymour put up the National Debt Clock in Times Square in 1989, believes the solution is for the government to collect more money. "I think America has more of a revenue problem than a spending problem," he recently told The Washington Post.
His suggested remedy: Ask for more from the rich. "I support higher taxes on people like me," he says.
Durst believes that it will be necessary for the U.S. to raise taxes in order to pay down the debt, and he doesn't agree with the policy of giving tax cuts to affluent people like him when funds could be used to ease the debt burden instead. Durst called the 2017 tax bill "an overall step in the wrong direction."
Why the national debt matters
Even as the economy booms, the national debt continues to rise. The debt, or the amount of money the country has borrowed to make up for the fact that it has had to spend more than it has, currently sits at more than $21.6 trillion. By the end of 2018, it is expected to be higher than the combined debt of all U.S. households for the first time in history, including that from mortgages, credit cards and student loans, The Washington Post reports, citing data from J.P. Morgan.
Additionally, the deficit, which is the difference between the amount the government spends and the amount it brings in, has grown to $779 billion, its highest level in six years, the Treasury reports. That's a 17 percent increase over where it was in 2017.
The nonpartisan Congressional Budget Office's official prediction is that the deficit will hit nearly $1 trillion in 2019 and keep growing.
Interest payments on the debt are estimated to triple in the next decade, rising to $915 billion a year by 2028. To put that number into perspective, those projections show that the U.S. government will spend a larger share of its money on interest on its debt (13 percent) than on defense (11 percent) or Medicaid (9 percent).
Interest costs "are projected to be the third largest category in the federal budget by 2026 (after just Social Security and Medicare), the second largest category in 2046, and the single largest category by 2048," reports the nonpartisan Peter G. Peterson Foundation.
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Although individuals aren't directly responsible for paying back the national debt, the amount the country owes can still affect you, because it can lead to higher interest rates, lower stock market returns and slower economic growth.
Plus, the more the government must spend on interest on its debt, the less it has to fund local projects you may care about, such as improving or maintaining infrastructure.
Disagreement about how to reduce the deficit
When President Donald Trump first proposed tax cuts during his 2016 campaign, he said that they wouldn't increase the deficit because the economy would "take off like a rocket ship." Indeed, the economy is strong. But since interest rates are going up, borrowing money is becoming more expensive.
While Senate Majority Leader Mitch McConnell calls the latest deficit data "very disturbing," he dismisses the notion that the tax cuts are adding to the national debt problem. The way to reduce the deficit, he says, is for the government to spend less, particularly on large federal programs such as Medicare, Social Security and Medicaid, The Washington Post reports.
Likewise, House Speaker Paul Ryan told reporters in March that "the name of the game in debt and deficits is entitlements."
However, others argue that spending cuts aren't the best solution. According to the Economic Policy Institute, a left-leaning think tank, Durst's proposal to raise taxes on the super rich is more practical, and also more humane.
"U.S. spending is pretty low compared to other advanced economies," EPI research director Josh Bivens tells CNBC Make It. "The idea that our spending is wasteful or inefficient or clearly too high seems wrong to me. Given that most of what this spending buys is useful and popular, this to me just means we should finance it and higher taxes should be part of that."
Most of America's domestic spending goes to "very popular, economically valuable programs," Bivens says, like Medicare, Medicaid and Social Security. "The projected growth in spending is near entirely driven by the health programs. If we cut these health programs in the name of budget-balancing, this wouldn't make the need for health care go away, it would just shift costs onto private households."
The best strategy to combat America's "unsustainable" level of debt may be a combination of the two approaches, former Federal Reserve Chair Janet Yellen told CNBC's Steve Liesman at the Charles Schwab Impact conference in Washington, D.C., on Tuesday. "If I had a magic wand, I would raise taxes and cut retirement spending," she said.
Bill Gates also supports higher taxes on the rich
Billionaire Bill Gates agrees with Durst that the wealthy should be contributing more, not less. "I need to pay higher taxes," the Microsoft co-founder told CNN's Fareed Zakaria in February as part of the discussion around tax reform. "I've paid more taxes, over $10 billion, than anyone else, but the government should require people in my position to pay significantly higher taxes."
For Gates, it's also a matter of supporting those with less. "People who are wealthier tend to get dramatically more benefits than the middle class or those who are poorer," he told Zakaria. "It runs counter to the general trend you'd like to see, where the safety net is getting stronger and those at the top are paying higher taxes."
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