Missing from President Obama’s State of the Union address was any mention of the national debt.
During his hour-long speech, the president touted the growing economy and accelerating job growth. But he stayed away from the government’s fiscal outlook, only stopping twice to mention that annual deficits have shrunk during his presidency.
Yet it has long been acknowledged that the aging population and rising cost of healthcare benefits will put pressure on the federal budget in the years ahead. If nothing is done to close the gap between spending and tax revenue, experts project, the debt will rise to an unsustainable level. In the long run, interest payments on the debt will crowd out spending on priorities such as defense.
Nevertheless, Obama’s State of the Union address Tuesday was the first in which he did not mention either the debt, which is the accumulated obligations of the federal government, or the need to reduce deficits, which are the amount by which spending exceeds tax revenue each year.
In his 2013 speech, the president said “the biggest driver of our long-term debt is the rising cost of healthcare for an aging population.” He called for a “balanced approach” in reducing deficits in the short term.
Closer to the financial crisis, Obama acknowledged that the country faced an unsustainable level of debt but defended his prior stimulus spending on the grounds that it was necessary in the short run. He said that “our efforts to prevent a second depression have added another $1 trillion to our national debt.”
In 2011, before the debt ceiling showdowns that ultimately led to the government sequester and before the reversal of the Bush tax cuts for high-income earners, Obama said that with the “worst of the recession is over, we have to confront the fact that our government spends more than it takes in,” adding that the “final critical step in winning the future is to make sure we aren’t buried under a mountain of debt.”
The president marked the end of the recession again Tuesday night.
“It has been, and still is, a hard time for many. But tonight, we turn the page,” Obama said at the beginning of his speech, claiming that “the shadow of crisis has passed.”
Nevertheless, he did not spell out any plan for debt reduction, instead focusing on tax increases to pay for new initiatives.
“It’s unfortunate, because when you look at our debt picture, it’s not looking good,” said Veronique de Rugy, a fiscally conservative analyst at the libertarian think tank Mercatus Center.
The annual deficit has been cut in a third since Obama has taken office. It fell from to $1.413 trillion in 2009 to $483 billion in 2014, or from 9.8 percent of gross domestic output to 2.8 percent.
Nevertheless, the federal debt has doubled since the financial crisis, to 74 percent of the economy. It is now just over $18 trillion.
The deficit is projected to shrink slightly again in 2015, according to the nonpartisan Congressional Budget Office’s most recent projections, to $478 billion, before again climbing indefinitely. The debt is supposed to climb to near 80 percent of the economy by the end of the 10-year budget projections, and then continue rising unsustainably.
Because so many Americans are entering retirement and healthcare costs are rising, the CBO says, rising debt “would also increasingly restrict policymakers’ ability to use tax and spending policies to respond to unexpected challenges and would boost the risk of a fiscal crisis.” In other words, the government could face such enormous interest payments that markets could lose confidence in its ability to repay its debts, leading to spiking borrowing costs and the threat of a default. The CBO is set to release updated projections Monday.
In its projections of Obama’s budget for the current fiscal year, the CBO projected that the plan would keep debt at 74 percent of GDP through 2024.
Republicans were quick to point out that Obama steered away from discussing the debt. “The president believes we should continue pursuing the same failed policies that have contributed to an economic recovery that’s leaving the middle class behind and a long-term budget crisis that threatens our future prosperity and national security,” said Rep. Tom Price, R-Ga., the chairman of the House Budget Committee.
Speaking at an event in the Capitol the morning after the speech, House Majority Leader Kevin McCarthy said reducing the debt would be the number-three priority of the House GOP, behind creating jobs and addressing the rise of the Islamic State of Iraq and Syria.
Republicans and the president are headed for a showdown over the level of debt sometime near mid-year, when the federal debt ceiling, currently suspended, is expected to becoming binding.
Nevertheless, the public has grown less concerned about the debt as the unemployment rate has fallen over the past few years.
Just 7 percent of respondents in a Gallup poll taken in early January said that the deficit or debt was the most important problem facing the country. Eight percent had given the same answer the year before, and 20 percent had mentioned the deficit as a top problem in 2013, the first year after the crisis that the deficit fell below $1 trillion.
