Why Don’t Republican Politicians Seem to Care About the National Debt?

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6 MIN READ - The Cautious Optimism Correspondent for Economic Affairs provides a time-tested explanation why so many Republican politicians (and Democrats) talk a great talk about reducing the deficit but never back it up with action. 

Trump, Mike Johnson, and John Thune

Note: This is a continuation of an article posted in early 2023: “Yes, Uncle Sam Can Now Run $1+ Trillion Deficits Forever,” but updated with higher 2025 numbers.

Many in CO Nation have expressed displeasure with the Big Beautiful Bill’s projected deficits and spiraling federal debt. While most seem to like the tax cuts and the work requirement for Medicaid, projections of annual $2 trillion deficits for a decade are unpopular with conservatives who hoped for a change from Biden’s four years and $8.1 trillion of new debt.

WHY?

So why do so many Republicans in Congress seem to be OK with blowing up the national debt by another $20 trillion over the next decade?

Comments in CO articles suggest many Republicans in Congress are RINO’s.

They wouldn’t be wrong.

Other comments suggest some Republicans really want to cut spending but are afraid they’ll be punished by voters in the midterms, especially if they represent politically unsafe states or districts.

That wouldn’t be wrong either.

But a universal reason politicians virtually never mention is the cold hard math of debt devaluation using growth and inflation. Specifically, that politicians the world over are happy to drive up their national debts because they believe future economic growth and inflation will bail them out later.

And sadly, the math has worked in the politicians’ favor for nearly a century. For example, the imminent disaster that was predicted when the debt hit $2 trillion under Ronald Reagan never materialized, nor did "just around the corner" hyperinflation when the debt hit $10 trillion at the end of George W. Bush’s presidency.

To explain, let’s start with today’s numbers. 

As of Q1 2025 America’s nominal GDP was $29.9 trillion, meaning that by now Q2 nominal GDP is already well over $30 trillion.

The national debt—debt held by the public, foreign investors, and intra-governmental agencies like Social Security and the Federal Reserve—stands at a whopping $36.2 trillion.

So the public debt stands at about 120% of GDP.

Now throw in that nearly every elected politician, all Treasury secretaries going back to the 1930’s including Scott Bessent and Steve Mnuchin, and all Federal Reserve governors and presidents factor projected real GDP growth and inflation into their assessments of the debt and future deficits.

It works something like this.

Assuming real GDP—the inflation-adjusted value of all goods and services produced by the U.S. economy—grows an average of 2% compounded a year for the next decade…

And assuming the Federal Reserve succeeds in its mandate of 2% price inflation compounded a year for the next decade, something it has far surpassed going back to 2021…

Then in 2035 U.S. nominal GDP will be (1.02^10) x (1.02^10) = 48.6% larger, or $44.6 trillion

At the same 120% of nominal GDP, the national debt will be $53.5 trillion in 2035.

Since the national debt is currently $36.2 trillion, that means the Treasury can rack up $17.3 trillion more in debt over the next decade with no change in the overall debt’s size relative to GDP.

That’s an average of $1.73 trillion deficits every year with, according to politician thinking, no financial consequences; i.e. “sustainable.”

The two sleights of hand that make this work are of course growth and inflation.

The growth part isn’t great, but it’s not horrible either. It’s kind of like borrowing more today in anticipation of earning a higher salary in a decade, and if that really works out then at least it’s a halfway honest way to manage higher debt (if not a bit optimistic).

But the dishonest part is the inflation. Half the formula is debasing the real value of the debt by effectively robbing Americans of their money’s purchasing power via the printing press. In fact, the last four years the formula has been closer to two-thirds inflation since real GDP has risen 11.6% while inflated prices have risen by 19.4%. Hence inflation is appropriately called “the stealth tax,” a fiscal trick that goes all the way back to ancient Greece.

See Economics Correspondent’s articles on world history’s first debt-reneging inflations at:

370 BC
https://www.cautiouseconomics.com/2024/02/economic-history-05.html

Roman Empire
https://www.cautiouseconomics.com/2023/07/inflation-currencies33.html

If we embrace more optimistic projections from the White House and assume real GDP growth will hit 3% the numbers get even bigger.

Also if we assume, as many Cautious Optimism readers do, that the government’s official inflation numbers are lowballed, and factor in a higher inflation rate of 2.5%, the “sustainable” debt ceiling rises even higher.

Because with these new numbers U.S. GDP will grow in a decade by (1.03^10) x (1.025^10) = 72% higher, from $30 trillion to $51.6 trillion.

And a national debt equal to 120% of $51.6 trillion will be $61.9 trillion.

Yes, assuming 3% GDP growth and 2.5% inflation, the national debt can grow by $25.7 trillion over the next decade with no change in its size relative to GDP. That’s $2.57 trillion average deficits for the next decade.

Now obviously the Economics Correspondent doesn’t approve of this sleight of hand, but it’s a trick Washington, DC has been using since at least World War II and you should be aware of it.

A big moral problem is this debt “sustainability” uses the central bank to rob Americans of their money’s purchasing power year after year. A practical problem is it assumes these economic growth rates can be sustained ad infinitum with no “speed bumps” to slow them down like a recession or a crisis.

As evidence during Trump’s first term the economy did manage to grow close to 3% a year, about 2.9% for the first three years, despite rising interest rates. Then in the last year Covid and lockdowns came and the entire formula was blown up. By the time Trump left office the debt-to-GDP ratio, which had stayed fairly stable during his first three years, had spiked from 102% of GDP to 124%.

And why is the debt-to-GDP ratio down slightly to 120% today? All that inflation during the Biden years courtesy of the Fed.

Perhaps the only saving grace is that every time media reporters, who were silent during the colossal Biden deficits, scream “the Trump plan could add another $3.9 trillion to the national debt” you know how small these numbers really are within the context of the government’s debt and inflation game. That is, the media is trying to shock viewers with a number like 3.9 trillion without mentioning that, under the same CBO forecasts, the debt-to-GDP ratio will barely move.

Finally, two quick corroborations of this cynical math from 20th century U.S. history.

PROOF IN HISTORY

1) At the end of World II the federal government had accumulated what was by far the largest debt in American history—both in nominal terms and as a share of GDP: $260 billion or 120% of GDP.

To Americans in 1945 these numbers were unbelievable. Many people doubted the debt could ever be repaid.

Today tax-and-spend Democrats love to tell us “Eisenhower embraced 90% tax rates to pay down the debt,” but in fact the debt was never paid down. By the time Jimmy Carter left office the national debt had nearly quadrupled to just shy of $1 trillion.

And from 1945 to 1980 the federal government ran deficits for 27 of 35 years which is not paying down anything.

Yet while the debt nearly quadrupled, the government’s fiscal position managed to improve dramatically. The debt-to-GDP ratio plummeted from 120% in 1945 to a meager and very manageable 31% by 1980.

And how did that happen? America’s nominal GDP grew from $228 billion in 1945 to $3.0 trillion in 1980.

Did the American economy really grow thirteen-fold in 35 years? No, it grew about 2.8-fold due to population growth and productivity increases.

But what really bailed the government out was inflation: prices rose 360% over the same period courtesy of the Federal Reserve. Hence 180% real GDP growth plus 360% inflation resulted in a thirteen-fold growth in nominal GDP (2.8 x 4.6 = 12.9).

2) Lastly, this strategy of using growth and inflation to keep racking up government debt for years, decades, and even forever was not only well underway by the 1940’s, it was openly advocated by economists, usually of the big-government persuasion.

Harvard’s Alvin Hansen, a famous economist known as “the American Keynes,” wrote in the 1940’s that:

“It can be shown mathematically that if the government continued to borrow indefinitely on the average X per cent each year of the national income, and if the rate of growth of increase was Y percent (of the national income), and if the average rate of interest on government obligations continued at Z percent, then the interest charges would never exceed A percent of the national income. In other words the government could continue to borrow, on average, X percent of the national income indefinitely without the tax burden, caused by the public debt, ever rising above A percent of the national income.”

But politicians will almost never make statements like this because they don’t want the public to realize that inflation is not “good for you” or “optimal for a market economy” as we’re told by government technocrats and Ivy League economists, but rather because it’s their main tool for running giant deficits while minimizing real repayment.