When U.S. government debt topped a trillion dollars for the first time in the early 1980s, the late New York real estate magnate Seymour Durst sent every member of Congress a holiday card that said: “Happy New Year! Your share of the federal debt is $5,000.”
Republicans, including President Donald Trump, campaigned on balancing the budget, yet they have added more than $1.5 trillion to the debt in the past year.
The result is that by the end of 2018, the nation will hit milestone: The federal government’s total debt owed to outsiders (known as “debt held by the public”) will exceed all debt that U.S. households have for mortgages, credit cards, cars, student loans and other personal loans for the first time in modern history, according to JPMorgan.
Durst died in 1995 and his son manages the National Debt Clock and the family’s real estate empire now. The normally private Douglas Durst felt compelled to speak out after what he calls the “worst months” he’s ever seen for fiscal policy.
Durst has a message for Congress: Tax the rich more.
“I support higher taxes on people like me,” said Durst in an interview from his office in midtown Manhattan with sweeping views of the city. “I think America has more of a revenue problem than a spending problem.”
When his father put up the National Debt Clock, total gross U.S. debt was just shy of $3 trillion — or about $12,000 a person. Today it is over $21 trillion, or about $65,000 a person.
Economists typically focus on debt held by the public, which is currently about $16 trillion, because that is the amount the government truly owes creditors (the rest of the debt is money one government agency owes another). Debt held by the public will top $127,000 per household by the end of the year, according to JPMorgan. Personal debt per household will average about $126,000.
“This is an astonishing statistic,” said David Kelly, chief global strategist at JPMorgan Funds. “Americans have a lot of debt. I always feel nervous signing a mortgage or a car loan. I think, can I afford all this debt? Then you realize the government is busy borrowing even more money on your behalf.”
The United States hasn’t had this high of a debt level as a percent of GDP since the World War II era, according to the nonpartisan Congressional Budget Office. It’s expected to grow quickly as Social Security, Medicare and interest payments balloon.
In good economic times, the government is usually able to shrink the deficit, but the latest data out last week shows the federal government is on track to spend about $900 billion more this year than the revenue it is bringing in. The last time the unemployment rate was this low, the government ran a surplus.
Durst thinks it’s inevitable taxes will have to go up, and he’s baffled that President Trump would give a tax cut to wealthy Americans like him. Durst and his father donated frequently to Democrats over the years, according to data compiled by OpenSecrets.org.
“We’re mortgaging our children’s future. It’s one thing to borrow money for infrastructure investment, but this …” Durst said. He makes an exasperated face and his eyebrows shoot up over his circular glasses. “The tax cut was an overall step in the wrong direction. Nobody who has any background in economics thought the tax bill was a good idea."
Durst says he will pay less in taxes now, although he declined to say how much he will save. Forbes estimates the Durst Organization is worth more than $5 billion.
“Fix the debt” has long been a Republican rallying cry and many GOP leaders have seized on the debt clock as a useful prop. Mitt Romney and Paul D. Ryan brought a mock debt clock to campaign stops on the 2012 presidential election trail, and Rep. Jeb Hensarling (R-Texas) has projected a debt clock on the House Financial Services Committee room since he became committee chair several years ago.
The National Debt Clock helped propel Congress to enact balanced budgets from 1998 to 2001, but the fiscal soundness was short-lived. The federal government has spent more money than it brings in every year since then. Debt shot up under George W Bush because of tax cuts and the wars in Afghanistan and Iraq, then it surged under Barack Obama during the Great Recession. Trump campaigned on shrinking — or even eliminating — the debt, but so far he has added substantially to it as well from the tax cuts and more military spending.
When debt gets this high, the government spends hundreds of billions of dollars each year on interest to creditors. That is money that must be paid and can mean that there are fewer funds available for education, infrastructure, the military and other priorities. Durst is particularly concerned about the environment.
In recent years, the U.S. government has been borrowing additional money to continue funding programs. Some economists like Dean Baker of the left-leaning Center for Economic and Policy Research, argue U.S. debt is highly desirable and the U.S. Treasury can continue borrowing without any issues.
“We have had no problem selling our debt, as shown by the low market interest rate on long-term bonds,” Baker said. “But suppose that for some reason in the next downturn no one wanted to buy our debt. In this highly unlikely scenario, the Federal Reserve could simply buy the debt.”
But most on the left and right warn there is probably a limit to how much borrowing can occur. At some point, the government will have to make hard choices about programs to scale back or cut or ways to raise revenue, especially as Social Security, Medicare and interest payments jump in the coming years. Republicans tend to favor cutting programs while Democrats tend to favor raising taxes on the rich. Many fiscal policy experts say Congress will probably have to do both.
Prominent Americans as varied as GOP senate candidate Romney, conservative Washington Post commentator George Will, Clinton’s Treasury Secretary Robert Rubin and Obama’s former defense secretary Leon Panetta have all warned recently the debt is leaving the country vulnerable to “economic collapse” (Will’s words), but their respective parties show little sign of restoring fiscal discipline.
Last week Republicans introduced a “tax bill 2.0” that would add another $2 trillion to the debt, and Democrats have numerous education and health care programs they would like to pass if they regain power that would probably increase costs.
The late Seymour Durst walked to work for most of his life and was famous for never wearing a winter coat because he thought it a waste of money. He couldn’t understand why top U.S. government officials didn’t have the same frugal mentality. He was part of a generation of Americans that came of age during the Great Depression and never lost a sense of valuing each penny and dime, but that generation is passing away.
Even the National Debt Clock no longer gets quite the attention it once did. The clock has been moved to an alley off West 43rd Street where few pedestrians stop to look at it. On a recent summer evening, several Chinese tourists were the only ones taking photos of it (China is the largest foreign holder of U.S. debt).
Clarification: This post has been updated to reflect that the George W Bush tax cuts also added to the debt.