The US national debt has ballooned to $35 trillion, but how much of this burden will be eased by US taxpayers? Yahoo Finance Senior Columnist Rick Newman explains how the US can pay down its $35 trillion debt.

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This post was written by Nicholas Jacobino

Video Transcript

Americans have a $35 trillion question on their hands.

Who is going to pay for our nation’s ballooning national debt?

Joining us now is John finances, Rick Newman?

You know, Rick, I always assumed it was, it was me frankly and my kid, but who else?

Well, it is gonna be you and your kid and me and all of us really uh Neither of the candidates this year, Joe Biden if he remains a candidate on the Democratic side and Donald Trump on the Republican side is really leveling with voters about this.

No politician really does.

And the reason is pretty obvious, uh there’s nothing for anybody to like and how we solve the problem and there’s a lot for everybody to hate.

Now, there’s a new analysis out by uh a budget expert at the Manhattan Institute named Bruce Riedel.

Um he does some good work on this on this issue and he has come up with a way to address the problem of the national debt and that doesn’t mean paying the whole thing down.

That’s kind of impossible, but it means just stabilizing the debt at about 100% of GDP, which is around where it is now.

In other words, preventing it from growing much more in the future.

And here, here’s some of the ways he says that things we’re going to have to do in order to do that.

Um, they’re going to have to be cuts in social security and Medicare for wealthier participants in those programs.

He would make no changes for people who are in the 40% the lowest 40% of households in terms of earnings there.

But some serious changes for wealthier seniors.

And let’s keep in mind a lot, you know, a lot of, a lot of seniors don’t have a mortgage anymore.

They own their home outright or they have a very small mortgage payment, they don’t have childcare burdens.

And there’s, there are a lot of people who have, uh, you know, millions of dollars in savings and yet they generally qualify for all the Medicare and Social security benefits that are on schedule that, that’s just gonna have to change.

I think that’s simple math.

Uh B uh Brian Reddell does also include, uh, some, uh, increases in individual income taxes for the wealthiest Americans.

There are some modest changes in business taxes that would take away and tax breaks and some other changes.

Um, there’s nothing draconian in this plan such as, for example, a value added tax or a what, what’s basically like a federal income tax, which would raise a lot of revenue all at once.

And I think that’s the point of this plan, which is that if you just do a certain number of things and do them fairly soon, including things that a lot of people are not going to like, you might actually be able to address this problem without having to owe overhaul the entire tax system or have massive tax cuts or tax hikes.

I mean, or something that would cause a recession.

So this problem is solvable.

There are many other analyses that show the same thing.

It’s solvable.

We just need politicians who are willing to tackle it.

What will be the catalyst that will tip them in the direction of doing that?

I mean, what, what would constitute a crisis that would force action?

Well, I think it is going to take a crisis.

I mean, there have been warnings about this for the last 20 years, maybe 30 years and Congress has done nothing except make the, uh, you know, borrow even more money and make the debt even higher.

So the, the crisis, if it happens, if it, if it gets to that point, in other words, if Congress and the next president went after that, just don’t do anything, what the, the, the debt crisis is gonna look like this.

Uh The US Treasury is going to be issuing so much debt that there aren’t going to be enough investors out in the world willing to buy it.

Um We’ve seen a few wobbles in the market for treasury securities with within the last 12 months, nothing like what I just described.

But the treasury has begun to alter the way it sells securities, changing the duration of the note of the notes and bills that it’s selling, for example, and do some things to make sure those auctions go smoothly if the, if the treasury gets to the point that there just aren’t enough people to buy all of that debt and that, you know, the market for debt is not bottomless in the world, we might, we might be getting close to the limit.

And the only thing that can happen then is uh interest rates go up and they might go up by a lot.

And if you try to do stuff like federal reserve money printing or other types of money printing, then you get inflation.

So if you really screw this up, you could get soaring interest rates and runaway inflation.

And that would certainly make everybody discussed more disgusted than ever with all the politicians.

Uh And that might be what it take.

I mean, if you were running a business, uh you probably wouldn’t want to do that, but that is the way we run the country and Rick just uh switching gears here a bit.

You know, President Biden seems to be kind of doubling down here.

Rick, pushing back on these calls.

Uh We’ve been seeing uh to, to get out, to drop out of this race.

What are you thinking, Rick?

I just wanted to get an update on where you are right now in this, I mean, the battle is clearly on within the Democratic Party.

Um And, you know, I think it’s fair to say that the odds of Biden dropping out.

Uh II, I don’t think there’s a reason to think he would resign as president, but there is obviously a chance that he would withdraw as the 2024 presidential candidate.

I mean, those odds have clearly been going up.

But this, all of this tension might actually be pushing us to a, to a new and a better place that we needed to get to anyway, which is that Biden is now under intense pressure to get out in public more and prove he has to prove that he is not the feeble old guy that we saw in the debate on June 27th.

So he supposedly is going to do another press conference this week.

I think that demands for this type of thing will just intensify.

He’s done very, very few uh press conferences or live interviews where he’s really been on the spot and he’s had to be able to show that he can muster thoughts quickly and perry any kind of accusations leveled against him.

And that and that he’s, you know, sharp enough to, to fight this kind of fight, he needs to fight against Trump Trump.

A as we learned from the June 27th debate.

One thing Trump could do is he can still attack.

He’s still very agile on the attack.

So Biden needs to be agile on the defense and on the counterattack.

And, you know, I think this would be a good development if we just see Biden coming out much more than he has before.

Not reading off the teleprompter as much talking to ordinary people at hom and in exchanges with people.

And let’s, let’s really test this guy and see if he’s up to it.

We shall see Rick.

Thank you.

Hi guys.