Ex-Treasury Sec. Paulson urges US to tame national debt
- Supporting data: The U.S. national debt is approximately $40.6 trillion, and rising.
- Expert quote: “We are paying more to service our past than invest in our future.” —Former U.S. Treasury Secretary Hank Paulson
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In 2008, then-Treasury Secretary Henry Paulson called America’s largest financial institutions “too big to fail.” Today, he says, the national debt is simply too big.
Paulson, who led the Treasury Department from 2006 to 2009, gave a speech Thursday calling for the United States to get its economic and political houses in order so it can more effectively lead the world. To do otherwise, he said, would risk disaster.
“No one knows how this new world will take shape. We are heading into uncharted waters,” Paulson said at the Economic Club of New York. “But there is one thing I am certain of: American leadership is indispensable.”
In a rapidly changing world, Paulson said, the U.S. faces three major challenges: taming its own dysfunctional politics, managing the risks and benefits of AI, and getting the “unsustainable”
“If not addressed, it will strangle our economy,” Paulson said of the debt. “It will thwart our prosperity and destroy our national security, which is rooted in economic strength.”
The U.S. national debt is currently about
“We are paying more to service our past than invest in our future,” Paulson said. “Every dollar that goes to interest is a dollar crowding out other necessary investments, like research, infrastructure, defense or preparing workers for AI.”
Paulson, who before running the Treasury was CEO of Goldman Sachs, predicted that sooner or later the national debt will cause a crisis. As out-of-control deficits erode the world’s faith in the U.S. government, he warned, the country will eventually “hit the wall” when it loses creditworthiness or faces a run on U.S. Treasury securities.
“History has shown that crises are inevitable,” he said. “So, we need to be prepared and have an emergency contingency plan — a highly targeted, ‘break-the-glass’ policy on the shelf.”
Paulson has plenty of experience with emergency measures. In 2008, when the global financial system was teetering on the brink of collapse, the Treasury secretary spearheaded a
The program faced severe criticism from both left-wing and right-wing detractors, but to this day Paulson believes it staved off a greater disaster.
“When you’re dealing with a big, messy crisis, there’s not an elegant solution,” he said during a question-and-answer session. “We made our share of mistakes, but I’m able to look back and say we got the big things right.”
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Paulson did not specify what a “break-the-glass” solution would look like in the event of a national debt crisis. But to avoid such a crisis in the first place, he recommended a few preventive measures to raise revenue and reduce spending.
“You could raise all the revenues we need to raise, without being a big drag on growth, if we just closed all the loopholes and preferences in the tax code,” he said. “I also believe we can raise a lot of money painlessly through a value-added tax. We’re one of the few countries in the world that doesn’t have one.”
Without referring directly to the current U.S. president, the Bush-era Treasury secretary also took issue with one Trump-era policy.
“We need clear, durable rules so markets and trading partners know where the lines exist,” Paulson said. “And unpredictable
