You could pin the US’s staggering $40tn in government debt to Donald Trump’s Keystone Cops-style governance. Tariffs he sold as a new source of revenue were struck down by the supreme court, forcing the government to return tens of billions of dollars to importers. Elon Musk’s “department of government efficiency” (Doge), ostensibly created to stop wasteful government spending, decimated federal programs and likely killed millions of children, but did nothing to close the budget deficit.
The burst of inflation following Trump’s misguided adventure in Iran sharply raised the cost of serving the government’s obligations. Yet as the federal debt hits an all-time high, up from about $35tn when Trump took office less than two years ago, it is worth noting that the US’s gargantuan indebtedness is in fact the product of a longstanding Republican strategy that took shape well before Trump could even dream about gold-plating the White House. It was called “starve the beast”.
One might recall Ronald Reagan’s address to the nation on 5 February 1981, just two weeks after he had taken office, when he delivered the sad news that “we’re in the worst economic mess since the Great Depression”. Government spending was out of control, he said. The budget deficit the year before had hit 2.6% of the nation’s gross domestic product.
Federal debt added up to a mind-boggling trillion dollars, a third of gross domestic product (GDP) – the broadest measure of the national economy. To end the government’s profligacy, Reagan argued, required depriving it of revenue. Or we can cure their extravagance by simply reducing their allowance.” And starving the government beast of tax revenue became the goal of Republican economic policy.
Every Republican administration since that speech has taken a machete to the tax schedule, slashing income tax rates for businesses and individuals, cutting estate taxes, and carving out broad tax deductions for preferred constituencies. What remained unsaid, over nearly half a century worth of tax cuts, was that the ultimate goal of the plan was not really to cure the “extravagance” and fix the government’s finances. It was, instead, to cement the Republican’s hold on power.
Despite Republicans’ sloganeering, their tax cuts never “paid for themselves” by generating a burst of economic growth. Instead, they borrowed the money to keep up spending. That invariably left Democrats in a budgetary mess to clean up every time they came into office.
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