The $40 trillion is a big number. It is smaller when we look at the publicly traded amount because our Civil Security funds and other government entities hold a substantial amount. And what we're going to do, we're going to have to grow our way out of this. And as I talked about at G20 in Asheville, we are going to talk about the U.S. growth strategy and encourage the rest of the world to come along with us.
So that is Scott Besson talking about the $40 trillion number, which is what the deficit continues to grow. And now it's a number that just seems. Impossible to pay off along with the interest rate that's involved with the debt. Tiana Lo Doshier joins us now, an economics columnist for the Washington Examiner. Tiana, did it catch you by surprise, forty trillion?
Unfortunately not. The line goes up in all things, and that's great when it's the stock market, and it's bad when it's the debt. But uh realistically. There is a bipartisan consensus to just not touch the major entitlement programs that are driving all of this. People are going to want to blame the tax cuts for this.
It's not the tax cuts. People are going to want to say, oh, Doge was inefficient. Doge wasn't inefficient. It's that ultimately the deficit has always been a product of the entitlement state. And you just think Social Security, Medicare, forget about discretionary spending.
This is non-discretionary spending. Correct.
So just to put numbers into perspective. We spent more.
So last month, what we spent in defense, we spent over twice as much just on Medicaid. Not even Medicare.
So it's Isn't Medicaid supposed to be state funded? Theoretically, but that's what Obamacare was for, right?
So Obamacare helped really federalize. This expansion of Medicaid. And this was one of the big fights during One Big Beautiful Bill: why are we having the federal government give $9 for every $1 a state contributes, especially when you have states like California that are using Medi-Cal, which is their state Medicaid, to fund illegal aliens, right? Not legal permanent residents, but illegal aliens. Ultimately, it's when you look back at every single dollar collected by the federal government last month in individual income taxes and payroll taxes, every single dollar went to Social Security and Medicare.
And so this is one of the issues of you can doge all you want, you can even cut defense spending, you can gut USAID, and it does make a difference on the margin, but we're not dealing with a problem on the margin.
So they want to quickly blame the tax cuts. Congressman Tom Swazi, cut 37. And the reason the deficit matters so much is because the Big Beautiful Bill. Caused the biggest deficit in the history of the United States of America. This is not just the Trump administration.
They're what's causing this major problem.
Now it's Democrats and Republicans over the past 30 years that have caused this problem. The deficit being so high causes upward pressure on the interest rates. When the interest rates are high, you can't afford to borrow money to buy a house. You can't afford to borrow money to lease a car. You can't afford money to buy things for your factory.
So upward pressure on interest rates. Caused by these deficits are causing massive inflation in our country, making things less affordable. Do you want to take on that theory?
So he's right with half of the equation, right? The reason why the 30-year fixed mortgage is so high, it's directly downstream of U.S. Treasuries. And no, Kevin Worsh can't just cut interest rates. The Fed no longer controls the long end of the curve.
So they affect the short-term treasuries, you know, one-month treasury, but they do not control anymore the 10-year, which is like that benchmark treasury.
So interest rates absolutely are. Rising right now. There is the bond market is in a crisis right now, and that's why Scott Besson is trying to buy back treasuries because the deficit is too high. Whereas wrong is about the causation.
So after one big beautiful bill, massive tax cut, right? Payroll taxes were up 7%. They're up 7% this year relative to last year when One Big Beautiful Bill was not in effect, right? Because it did spur economic growth. And if you're getting a wage increase, ultimately, this is the Laffer curve in action, right?
There's an optimal tax rate. And if you cut taxes and payroll taxes increase, that means that you were on the wrong side of the laugher curve, right? The issue is it's all spending.
So even though payroll taxes were up 7% last month. Not more than how much it costs the country to run. Yeah, exactly. And it is all Medicare, Medicaid, Social Security.
Social Security was up 5% last month, Medicare up 8%, Medicaid up 8%. But yet people will tell you that Social Security is about to go belly up. And they'll say there's not enough money in Medicaid and Medicare. That's why you need the supplemental insurance on top of that. And when people say Medicaid, Medicare for all, that's just.
Ridiculous, right? Absolutely. I mean, if you want to nash so Medicare for all would nationalize 20% of the American economy, about 20% is healthcare. And when you think about why Luigi Mangioni murdered Brian Thompson, we can say that now because he pled guilty. He said it was because of United having too many denials.
How many denials do you think a federalized health care system would have to give when you think about the fact that estimates it's between $40 trillion and $75 trillion to fund Medicare for all for 10 years? Think about corporate profits, do not amount to that much in a decade. Like net corporate take-home profits. That is less money. Than what it would take to fund Medicare for all.
So, how much worse quality of insurance would you be getting if it was Uncle Sam? By executive fiat, I mean, that's when conservatives were talking about death panels during Obamacare debate, right? That is what they were talking about. If you have a single-payer system, it's up to the government to say, you know what? We don't think 86-year-old grandma's worth having her have a heart transplant anymore.
Goodbye. Whereas under right now, say what you will about our system. And I know, like, from experience, I have a three-month-old. She came a month early.
So we just spent three weeks in the NICU. And that NICU bill was really big. And it was really big because you have an army of these wonderful nurses and doctors who are doing 24-7 care for something that, you know, 100 years ago, both. Me and my baby would have died, right? But instead, we saved babies.
If you look at other countries with single-payer healthcare systems, their premises do not do as well. And it's because the government has to say at a certain point, it's too expensive. Mm-hmm. And we don't want to do that. And yet we still complain about quality and things to that nature.
I've yet to see a formula that really works and where people could say that's the country that's got it down. Because UK and Canada, they used to say, well, how come they can get everything? Nobody's happy with their system in either one of those countries. It's, you know, people point to Singapore or Switzerland, the countries where they have a universal mandate, a sort of individual mandate similar to Obamacare, but it's privately operated.
So almost like a voucher system, if you will. But ultimately, the real rub is that the United States is responsible for the majority of the world's medical research and development and pharmaceutical research and development, right? We're 4.4% of the world population, and we fund, I think it's two-thirds of all pharmaceutical profits.
So when Trump brings up things like we need to tariff countries for free riding on to our medical research and development, he He is not wrong. The difference, what he really needs to be doing is going to these insurance companies and saying, don't cut a better deal with Canada. And upcharge the American consumer, make everyone pay equally. And because he's not wrong about the problem, it's just about, you know, we need everyone to be funding the next generation of cancer research, GLP1s, every diabetes research. Because right now we're the only ones who are doing it.
Here's Maya McGinnis. She's the president of Committee for Responsible Federal Budgeting on the Deficit Cut 38.
Well, on one hand, we've known that this number was coming. It's all quite predictable because the projections are there. On the other hand, the timing has sped up and the number is just jaw-dropping. The fact that we are at $40 trillion and that we've got here so quickly compared to when we were at $20 trillion, say, in just 2017, is really something to take note of. And if ever there were a warning sign, this is one.
The problem is our lawmakers just don't seem to be paying attention. One would wish that this would mean there would be an immediate meeting on how do we change course. But the likelihood is we will continue to pass legislation that adds to that borrowing instead of reducing it.
So do you want to take on anything she said? Her numbers are right in terms of the deficit from 2017 to today. Her numbers are correct. And look, Committee for Responsible Federal Budget, they do great work. I think they have a little bit more faith in the idea that a bipartisan commission would do anything other than just raise taxes, right?
Because they always say, do a bipartisan commission. No one cuts. No one cuts. Politically, it's not palatable. And that's ultimately, you know who I will vote for for president?
The Scrooge McDuck who says. We are spending too much. We don't have a tax problem. We have a spending problem. And it's multifaceted.
There are ways to do this to make sure that if you are a senior who is currently 75 years old and you've been out of the workforce for 10 years, there's a way to do it where we aren't immediately leaving people homeless and whatnot. But The Social Security retirement age has budged, I think, two years in almost 100 years of its existence.
So wildlife expectancy is increasing.
So I think it should go up, right? Yes, exactly.
So just say, I mean, we were living longer. Correct.
67, 69, would you do you think that would help save the system? Raising the retirement age immediately and then indexing it, you know, where it goes up six months every, you know, two years or so, that, or, or tie it to life expectancy, right? Like that. Should be obvious. And it doesn't have to happen all at once.
But clearly, someone my age, there's zero reason for me to expect ever that I will retire at 65, you know? And nor will Social Security be there. No. Right. No.
But I mean, the thing is. We know the people that are going to retire at 65. They're the ones with the pensions, and they have that thing. But the average American. Should it should not.
I don't think our economy can survive if everyone goes to retire at 65. No, and by 2030, there will be more seniors in this country than there will be. Kids under the age of 18 and under, right?
So we have a shrinking workforce. We're doing mass deportations. And the mass deportations in general are a good thing because on net, the Manhattan Institute has very good research on this. On net, Illegal aliens, low-income visa holders tend to be a net drain on the federal deficit. What we want are more high skilled workers.
So H-1B visa workers, STEM visa holders, they do contribute a bunch to the American economy.
So the mass deportations on their own aren't a bad thing, right? And we also want to get rid of, of course, the criminals, as Trump says. But It's as if we continue to have a shrinking population, an aging population, that worker to retiree ratio falling and falling and falling to the point where, you know, when Social Security was first launched, you had four, five, six workers to every one retiree. We're now down to three workers and it's trending slowly to two. And that's a scary thing.
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So what's wrong with the speech that says that? Wouldn't it be great to hear the speeches say, hey, when we started it was four to one.
Now it's three to one. In ten years, it's going to be two to one. I'm going to show you the math. It's not going to work.
So what I'm going to need to do is grandfather in it if you have to, but beginning in twenty 30, we're going to be 67, and we're going to be at 69. And let me just show you: the age was 54, the average American was living at 54 when Social Security was started in 1945.
Now we're the average age, I think we die at 74, and women a little bit later. Yeah, I mean, that would help. But the other thing to keep in mind, he president Scott Besson says we can grow our way out of it. Could AI be the magic bullet? Potential so Okay, I think that the Kevin Worsch Scott Bessant theory of AI is directionally correct.
We would be in a technical recession if not for AI. We would have had at least the last two quarters would have been economic contractions if not for AI. The data centers are unambiguously incredible things across the board, right? Not just in terms of GDP, but also. Reshoring manufacturing.
We've been waiting for the manufacturing jobs to come back under this administration, and it's here with the data centers.
So, Georgia is the people that build it, build the data centers itself and work there, right? It creates permanent employment.
So, it's just change your aesthetic perspective of what reindustrialization looks like, and you have the data centers. But here is the caveat with the data centers. Yes, you know, Georgia Tech did a study and found that when a data center moves into a new county, wages go up by 5%, employment goes up by 3.5%, it's all great across the board. The issue is that The technical definition of moving into a debt crisis is when. the interest rate on national debt becomes bigger than the rate of economic growth.
So, the reason why this is an issue is because of that treasury market that is having Scott Bessant freak out.
So, right now, the Atlanta Fed projects. That for the second quarter of the year, that will have grown at 4%, right? Or for the third quarter of the year that will have grown for 4%, which is phenomenal, unbelievable. It's, it's. If a politician, if a president says on the campaign trail, we're going to bring 4% economic growth, everyone says they're lying.
It could very well be happening. But it If the 30-year Treasury yield is soaring to 5.3% and the 10-year Treasury yield is trending towards 5%, in the long run, think about our national debt.
So the debt held by the public, which is technically different than just the top 40 trillion, 32 trillion of that is held by the public. That means it's not just debt the government treats to each other. Basically, we have about $10 trillion of debt that matures and has to be refinanced each year.
So $10 trillion that was maybe refinanced when the 10-year yield was at, you know, $4. 4.1% now is to be refinanced when the treasury yield is at 4.7%.
So we're talking hundreds of billions of dollars in new costs for the same debt. Just because treasury yields are higher. Because no longer does the Fed control the interest rate, it seems. It could drop it, but it doesn't necessarily mean your mortgage is going to drop. Correct.
And that wasn't the case 10 years ago or even five years ago? No, it was a very different environment. I mean, and Biden made this mistake too, where he clearly thought, oh, the Federal Reserve can just control interest rates. At a certain point, you lose control. This is why James Carville back in the 90s said if he died and was reborn again, he'd want to come back as the bond markets because the bond markets do control everything.
Because at a certain point, when the debt was more manageable, when there was a belief, you know, oh, Social Security isn't going to go insolvent in the next. Five to six to seven years, people were more willing to, you know, bet U.S. Treasury, safest investment in the world. But since Liberation Day, it's been a much more tenuous situation. And so I feel bad for Scott Besson because he can't control the deficit, right?
All he can do is play the cards that he has. But ultimately, it's up to Congress and the president to focus on those entitlements. Wow, such a fascinating conversation.
Well, I did most of the listening. Tiana Lo Adocio, thanks so much. And Economist Columbus for the Washington Examiner, appreciate it. Dicey Times. Did you know Fox News has a wine shop?
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