ARI SHAPIRO, HOST:
Now we're going to take a close look at something that is not in the budget plan the White House proposed yesterday. Steps to eliminate the federal deficit are nowhere to be found. In fact the plan would add $7 trillion to the deficit over the next decade. That has upset many fiscal hawks who consider getting rid of the deficit to be a core principle of the Republican Party. NPR senior business editor Marilyn Geewax joins us to explain what the deficit does to the country. Hi, Marilyn.
MARILYN GEEWAX, BYLINE: Hi, Ari.
SHAPIRO: In case people don't know, what does it mean for the government to run a deficit?
GEEWAX: Well, here's a way to think about it. Say you take home $50,000 a year, but you spend 55,000. You could put that extra $5,000 on your credit card, and that's your gap. That's the gap between income and expenses. And the first time you do it - OK, so you get away with it, and you owe that $5,000. But the next year, you owe 10,000 plus the interest, and every year, it keeps piling up. That's your total debt. So that's the difference between the annual deficit and the total debt.
And this is what the government does. Every year it runs short, it borrows money. It piles up deficits, and then it all adds up to a national debt. And right now we have these new tax cuts coming in. There's more spending probably for the military, for infrastructure, all kinds of things. And that will increase those annual deficits. They'll get piled on top of our existing 20 trillion - with a T - 20 trillion in national debt.
SHAPIRO: And how does the forecast now compare to what we've seen historically?
GEEWAX: Well, it's a lot. It's huge. It's starting to be where we get - (laughter) we're looking at it as normal to have a debt that is as big as our entire economy for the entire year. You know, our GDP is about $20 trillion. It was never that high except in times of war. It should be more like maybe 50 percent. So the president has put out this new budget, and he doesn't show that budget deficit going down anytime in the future.
SHAPIRO: As you've said, the U.S. has run a deficit for a long time already. Is it a problem to run annual shortfalls indefinitely?
GEEWAX: Well, this is why economics can be interesting. This part could be somewhat debatable. Let's look at the deficit in a somewhat less scary way. Say you're that person, and you owe that $55,000 every year. So you're putting the 5,000 on your credit card. You know, if you keep doing that, your credit's going to get cut off. Somebody's going to put you into bankruptcy court.
But when you're the U.S. government, people trust you. You know, we've been paying our debts on time in full for, you know, literally centuries. We have this big, powerful economy. We've got a military. We control our own currency. So foreign investors are fine with loaning us more money. And as long as people want to keep lending us more money, then maybe it doesn't matter if we increase our borrowing. And then there's this one other big advantage that we have.
SHAPIRO: What's that?
GEEWAX: (Laughter) Well, you know, when you and I have expenses, they're immediate. Like, we owe the rent. We owe to pay for our dinner. We have to buy gas. But when the federal government has bills to pay, they're actually like projected expenses - their promises. So you and I - we're being promised that someday we'll get a Social Security check, you know? We're counting on that to be there for us. But the government could change its promise. Congress could just suddenly say, Marilyn, Ari, no checks for you.
GEEWAX: We're out of money.
SHAPIRO: (Laughter) And what are the chances of Congress doing that?
GEEWAX: (Laughter) Well, that does seem pretty unlikely. But, you know, if the deficits get big enough and you start scaring your investors, you could either raise taxes a lot on future generations. That's a problem for the kids and grandkids. Or you could keep cutting those promises to the people. And some people say that's exactly what Republican lawmakers are trying to do - that it's sort of a long game, that they're going to keep using these deficits as a pretext to keep cutting back on government.
SHAPIRO: All right.
GEEWAX: So that's really where we're at.
SHAPIRO: That's NPR senior business editor Marilyn Geewax. Thank you.
GEEWAX: Oh, you're welcome. Transcript provided by NPR, Copyright NPR.