In 2023, the standoff over the debt ceiling threatened to have catastrophic consequences for the U.S. and the world economy. Why were the politics so complicated? Why were the stakes so high? This seminar explores the long-term fiscal challenges facing the United States grounded in a broader discussion of the postwar political economy. Although the nation exited World War II with a record level of debt, within three decades, the debt-to-GDP ratio had fallen by almost 80 percent. However, significant tax cuts in the 1980s and again in the 2000s, the growth of entitlement spending, and a series of shocks (e.g., two wars, the financial crisis, and the COVID-19 pandemic) brought about a great reversal. Within the next few decades, the national debt is projected to exceed 200 percent of GDP. By that time, interest payments will be the largest component of federal spending. Moreover, absent policy change, the trust funds supporting Social Security and Medicare will become insolvent, placing greater pressure on public finances. This seminar will explore the structure of federal finances, the politics of taxation, the growth of entitlements as a share of federal spending, the ways in which polarization has undermined the budgetary process, and the normative and practical implications of the debt. We will conclude with a discussion of competing reform proposals. |