Don't panic about the national debt — the US has the wealth to handle it

The U.S. national debt recently passed $40 trillion, hitting this monstrous milestone months ahead of Congressional Budget Office projections, in part due to tariff refunds increasing the total deficit. In March, the federal debt held by the public reached the size of U.S. annual gross domestic product, nearing its all-time peak from more than 80 years ago, when we were paying off World War II. These headlines have renewed calls for austerity, but the truth is, America is nowhere near broke. On the contrary, the nation holds a staggering amount of wealth — far more than the debt it owes. The real question is not whether we have the resources to manage the debt, but whether we have the will to use them. Panic about the nation's finances rests almost entirely on one number that is ubiquitous in economics: debt as a share of GDP. That metric is useful, especially when comparing countries over time. However, it is not the only number that matters, and on its own, it does not give us the full picture. GDP measures what the country earns in a single year, while the national debt accumulates over generations. Judging one against the other is like a bank deciding how large a mortgage a family can afford by looking only at a single month's paycheck while ignoring the family's second home, multiple cars and a sizable retirement account. No careful lender works that way. It weighs what a borrower owns, not just what they earn in a month. We propose measuring the debt a different way. Instead of dividing the debt by a single year's income, divide it by the nation's private wealth — that is, the combined net worth of everyone in America. This includes the value of homes, businesses, stocks, retirement savings and so on. By that measure, the national debt equals only about one-fifth of total wealth. At the height of World War II, it was nearly twice that. Yes, the debt has grown, but the resources available to pay it down have grown even faster. How has this happened? Over the last 40 years, U.S. wealth has surged far faster than GDP. In the mid-20th century, private wealth was worth about 2.5 times that of GDP; today the factor is closer to 4.5. Much of that gain comes from rising asset prices for stocks and real estate — increases that aren't included in GDP and which accrue overwhelmingly to top earners. Why care about a seemingly technical debate over economic measurement? Because how we measure a problem shapes which solutions we are willing to consider. When the debt is framed as a crushing multiple of one year's income, the conversation narrows to two unappealing options: cut spending or raise taxes on the wages and salaries ordinary Americans live on. Compare the debt to the country's total wealth, though, and a different path emerges — one that requires neither austerity nor squeezing the middle class. Consider that a one-time tax of just 10 percent on the wealth of the top 1 percent would raise enough to pay off roughly one-sixth of the entire federal debt in a single stroke. Instead, today's wealthy are taxed remarkably lightly. Because gains on stocks and other assets are not taxed until they are sold (or never taxed at all if passed on to heirs after death), the richest Americans can watch their fortunes expand while paying next to nothing. This is why Elon Musk's jump past a trillion dollars in June did not come with a single dollar in additional tax owed. If the U.S> is willing to look at what it owns, versus only at what it earns, it would open up a new set of options for paying down the debt: taxes on wealth and property, and reforms to how inheritances and capital gains are taxed, among them. Of course, people will disagree about which, if any, to use. But ultimately, that is a debate about priorities and political will, not about whether we have the ability to pay off our debt. Because we do. None of this means deficits don't matter or that debt can grow without limit. Rising interest costs are real, and they are already displacing critical public investments. The debt is large, but the nation's wealth is far larger. It is past time we started measuring and acting accordingly. Austin Clemens is a visiting fellow at the Washington Center for Equitable Growth. David Mitchell is a senior fellow for tax and regulatory policy at the Washington Center for Equitable Growth.