Deal Averts Default, But Doesn’t Fix Debt Problems

VPM | By Tamara Keith

Published August 3, 2011 at 8:59 AM EDT

Updated December 11, 2023

The National Debt Clock, a billboard-size digital display showing the increasing U.S. debt, is seen in New York City on Monday. Congress passed a bill Tuesday that would raise the nation's debt limit.

The bill passed Tuesday to raise the nation’s debt limit and avoid default includes as much as $2.4 trillion in deficit reduction over the next decade.

“It’s an important first step to ensuring that as a nation we live within our means,” President Obama said.

The deal was hard-fought, with cuts some say will be painful, but experts say it doesn’t come close to fixing the country’s debt problems.

“It sounds good. It sounds big,” says Diane Lim Rogers, chief economist at the Concord Coalition, a nonpartisan group that pushes for deficit reduction. “Unfortunately our fiscal challenges are much greater than that.”

Rogers says this deal doesn’t cut the nation’s debt. Not even close. It just slows the growth. Even with all these cuts, the government will still spend more each year than it brings in, she says. Much more.

Balance Rising

“All we’ve done with this debt-limit deal is committed to a plan that says, ‘OK, we won’t put quite so many new charges on our credit card each month,'” Rogers says.

The national debt is the total amount the U.S. owes — currently about $14.5 trillion. In credit-card terms, the debt is the outstanding balance.

The deficit is the difference between what the government spends each year and what it brings in. It’s like the new charges listed on the bill. This year’s deficit is expected to be about $1.4 trillion.

“[The deal] doesn’t mean we’ve stopped using the credit card,” Rogers says. “It doesn’t mean we are even paying down our credit-card balance. It certainly doesn’t mean we’ve cut up our credit card.”

There are a couple reasons why this is a problem: The more the federal debt grows, the more interest the U.S. has to pay on that debt. Eventually it starts crowding out other priorities. Even with this deal, Rogers says, the nation’s deficits are so big, they’re outpacing economic growth. This means the debt compared to the size of the economy will continue growing.

Rogers calls that “a recipe for an unsustainable situation.”

Difficult Choices Needed Ahead

As part of the deal, the deficit trims come in two phases. Congress has agreed on nearly $1 trillion in discretionary and defense-spending cuts. A so-called supercommittee of Congress is supposed to come up with the other $1.5 trillion during the next few months.

Marc Goldwein, policy director for the bipartisan Committee for a Responsible Federal Budget, says Congress should be aiming higher.

“What they should be shooting for is about double their $1.5 trillion goal,” Goldwein says. “They should be shooting for more like $3 trillion.”

But to get there, Goldwein says, members of the supercommittee would have to do things that would anger partisans on both sides. For Democrats it would mean accepting tough changes to Medicare and Social Security.

That would include “some painful adjustments like raising the retirement age or reducing benefits for high earners or increasing the amount of income subject to taxation,” Goldwein says.

Republicans would have to accept revenue increases.

“We must reform the tax code,” he says. “We need to get rid of all these deductions, credits, exclusions that really just riddle the tax code and cost us a trillion-plus a year.”

But for every tax break and every government program, there is a constituency that doesn’t want it to change. That’s why it was so hard for Congress to settle on the deal it ended up with, and why it will be even harder to come up with a plan that would put a stop to that rising balance on the nation’s credit card.

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Tamara Keith

Tamara Keith has been a White House correspondent for NPR since 2014 and co-hosts the NPR Politics Podcast, the top political news podcast in America. In that time, she has chronicled the final years of the Obama administration, covered Hillary Clinton's failed bid for president from start to finish and thrown herself into documenting the Trump administration, from policy made by tweet to the president's COVID diagnosis and the insurrection. In the final year of the Trump administration and the first year of the Biden administration, she focused her reporting on the White House response to the COVID-19 pandemic.

In 2018, Keith was elected to serve on the board of the White House Correspondents' Association and is the association's president through July 15, 2023. In that role she leads the press corps in its interactions with the White House, advocating for press conferences and coordinating travel. Her mission for the year of her presidency is to demystify the White House beat for the public, in an effort to help restore trust in the press, an essential pillar of American democracy.

Previously Keith covered congress for NPR with an emphasis on House Republicans, the budget, taxes and the fiscal fights that dominated at the time.

Keith joined NPR in 2009 as a Business Reporter. In that role, she reported on topics spanning the business world, from covering the debt downgrade and debt ceiling crisis to the latest in policy debates, legal issues and technology trends. In early 2010, she was on the ground in Haiti covering the aftermath of the country's disastrous earthquake, and later she covered the oil spill in the Gulf. In 2011, Keith conceived of and reported "The Road Back To Work," a year-long series featuring the audio diaries of six people in St. Louis who began the year unemployed and searching for work.

Keith has deep roots in public radio and got her start in news by writing and voicing essays for NPR's Weekend Edition Sunday as a teenager. While in college, she launched her career at NPR Member station KQED's California Report, where she covered agriculture, the environment, economic issues and state politics. She covered the 2004 presidential election for NPR Member station WOSU in Columbus, Ohio, and opened the state capital bureau for NPR Member station KPCC to cover then-Governor Arnold Schwarzenegger.

In 2001, Keith began working on B-Side Radio, an hour-long public radio show and podcast that she co-founded, produced, hosted, edited and distributed for nine years, back before podcasts were cool.

Keith earned a bachelor's degree in philosophy from the University of California, Berkeley, and a master's degree at the UCB Graduate School of Journalism. Keith is also a member of the Bad News Babes, a media softball team that once a year competes against female members of Congress in the Congressional Women's Softball game. She serves on advisory boards for the University of California Center for Free Speech and Civic Engagement and the UC Berkeley J-School.

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