Managing the National Debt
Understanding the Right Time to Increase Debt
Throughout U.S. history, periods of major economic crisis—like the Great Depression, the 1980s recession, the 2008 financial crisis, and the COVID-19 pandemic—have all shared one important feature: the government increased spending to fight unemployment and stimulate recovery. When done right, increasing the national debt during a recession is not only justified—it’s necessary. But history also shows that for long-term stability, debt increases should come with a built-in mechanism to repay that debt once the economy improves.
Throughout U.S. history, periods of major economic crisis—like the Great Depression, the 1980s recession, the 2008 financial crisis, and the COVID-19 pandemic—have all shared one important feature: the government increased spending to fight unemployment and stimulate recovery. When done right, increasing the national debt during a recession is not only justified—it’s necessary. But history also shows that for long-term stability, debt increases should come with a built-in mechanism to repay that debt once the economy improves.
Historical Examples of Spending-Driven Recovery
- FDR & the Great Depression: Franklin D. Roosevelt’s New Deal massively expanded federal spending and raised taxes on the wealthy. While the national debt rose, these policies helped rebuild the economy, and the debt-to-GDP ratio fell in the post-WWII boom.
- Reagan & the 1980s Recession: Ronald Reagan also increased federal spending—especially in defense—while cutting taxes. This did bring growth, but the national debt tripled under his administration due to the lack of a repayment mechanism.
- Obama & the 2008 Crisis: Barack Obama took a different approach. He front-loaded stimulus spending to reduce unemployment (which peaked over 10%) and then followed with tax increases and slowed spending growth. Obama became the only president since the 1970s to reduce overall federal spending in absolute dollar terms in a few years. Unemployment fell more quickly than during Reagan's recovery, and the debt-to-GDP ratio stabilized.
A Balanced Policy Approach
A smart national debt policy would:
A smart national debt policy would:
- Allow Debt Increases During Recessions
Justified increases in federal debt can stimulate recovery by boosting demand and reducing unemployment. - Implement an Automatic Repayment Mechanism
Taxes should automatically adjust based on changes in the national debt. For example, a 3–4% across-the-board income tax increase over five years could repay Biden-era debt growth (~$5.5 trillion + interest). Paying off the full $37 trillion debt in 20 years might require ~70–80% higher tax revenue than today—still possible with phased, progressive measures. - Tie Fiscal Responsibility to Political Accountability
If tax adjustments occur just before elections (e.g., in October), voters can directly evaluate the impact of a president’s fiscal policies.
Learning from the Past
Post-WWII America had top income tax rates above 90%, strong estate taxes, and broad-based prosperity. Wealth inequality was lower, and the middle class thrived. The wealthy still did well, but policies were structured to prevent massive generational wealth concentration and economic instability. Over time, those policies were weakened, and inequality rose. Restoring elements of that era—like progressive taxes and estate taxes—may help rebalance the system.
Conclusion
The right approach to managing the national debt isn’t about never borrowing—it’s about borrowing wisely. Use debt to stimulate recovery in hard times. Then, repay it in good times through fair and structured taxation. That’s how the U.S. thrived after WWII, and it’s how we can restore long-term economic health and fiscal responsibility today.
Post-WWII America had top income tax rates above 90%, strong estate taxes, and broad-based prosperity. Wealth inequality was lower, and the middle class thrived. The wealthy still did well, but policies were structured to prevent massive generational wealth concentration and economic instability. Over time, those policies were weakened, and inequality rose. Restoring elements of that era—like progressive taxes and estate taxes—may help rebalance the system.
Conclusion
The right approach to managing the national debt isn’t about never borrowing—it’s about borrowing wisely. Use debt to stimulate recovery in hard times. Then, repay it in good times through fair and structured taxation. That’s how the U.S. thrived after WWII, and it’s how we can restore long-term economic health and fiscal responsibility today.