But as far back as the 1980s, America started amassing debt at more alarming levels, and our leaders began to realize that a larger challenge was on the horizon. They knew that eventually, the baby boom generation would retire, which meant a much bigger portion of our citizens would be relying on programs like Medicare, Social Security and possibly Medicaid. Like parents with young children who know they have to start saving for the college years, America had to start borrowing less and saving more to prepare for the retirement of an entire generation.
To meet this challenge, our leaders came together three times during the 1990s to reduce our nation’s deficit. They forged historic agreements that required tough decisions made by the first President Bush and President Clinton; by Democratic Congresses and a Republican Congress. All three agreements asked for shared responsibility and shared sacrifice, but they largely protected the middle class, our commitments to seniors and key investments in our future.
As a result of these bipartisan efforts, America’s finances were in great shape by the year 2000. We went from deficit to surplus. America was actually on track to becoming completely debt-free, and we were prepared for the retirement of the Baby Boomers.
But after Democrats and Republicans committed to fiscal discipline during the 1990s, we lost our way in the decade that followed. We increased spending dramatically for two wars and an expensive prescription drug program — but we didn’t pay for any of this new spending. Instead, we made the problem worse with trillions of dollars in unpaid-for tax cuts — tax cuts that went to every millionaire and billionaire in the country; tax cuts that will force us to borrow an average of $500 billion every year over the next decade.
To give you an idea of how much damage this caused to our national checkbook, consider this: in the last decade, if we had simply found a way to pay for the tax cuts and the prescription drug benefit, our deficit would currently be at low historical levels in the coming years.
Of course, that’s not what happened. And so, by the time I took office, we once again found ourselves deeply in debt and unprepared for a baby boom retirement that is now starting to take place. When I took office, our projected deficit was more than $1 trillion. On top of that, we faced a terrible financial crisis and a recession that, like most recessions, led us to temporarily borrow even more. In this case, we took a series of emergency steps that saved millions of jobs, kept credit flowing and provided working families extra money in their pockets. It was the right thing to do, but these steps were expensive and added to our deficits in the short term.
So that’s how our fiscal challenge was created. This is how we got here. And now that our economic recovery is gaining strength, Democrats and Republicans must come together and restore the fiscal responsibility that served us so well in the 1990s. We have to live within our means, reduce our deficit, and get back on a path that will allow us to pay down our debt. And we have to do it in a way that protects the recovery, and protects the investments we need to grow, create jobs and win the future.
Now, before I get into how we can achieve this goal, some of you might be wondering, “Why is this so important? Why does this matter to me?”
Here’s why. Even after our economy recovers, our government will still be on track to spend more money than it takes in throughout this decade and beyond. That means we’ll have to keep borrowing more from countries like China. And that means more of your tax dollars will go toward paying off the interest on all the loans we keep taking out. By the end of this decade, the interest we owe on our debt could rise to nearly $1 trillion. Just the interest payments.
Then, as the baby boomers start to retire and health care costs continue to rise, the situation will get even worse. By 2025 the amount of taxes we currently pay will only be enough to finance our health care programs, Social Security and the interest we owe on our debt. That’s it. Every other national priority — education, transportation, even national security — will have to be paid for with borrowed money.