AMNA NAWAZ: Republicans in Congress are hashing## out a new tax cut and spending bill# that's projected to add trillions to## the national debt.

We will get to some# of those specifics in just a moment.

GEOFF BENNETT: But, first, let's take a step# back and explain a bit more about our already## ballooning national debt, how we got here and what# it means for our economy and future generations.

Here's economics correspondent Paul Solman.

PAUL SOLMAN: When we were there the other# day, the debt clock that's been in Manhattan## since 1989 said our country owed $35# trillion, $903 billion, $414 million.

The number's the total of every dollar the U.S.# government has borrowed to cover the difference## between what it spends and the revenue it# collects.

That collective debt has long## fueled anxiety about how it will burden future# generations.

Take this ad, which appeared on TV## a few years before the clock went up, time# so long ago that it's barely video-worthy.

ACTOR: You owe the United States# government in round numbers $50,000.

PAUL SOLMAN: The estimated projection for a# baby born today, four times as much.

Scary?

NATASHA SARIN, President, Budget Lab at# Yale University: The size and the sort of## trajectory of our fiscal path is making# a lot of people understandably nervous.

PAUL SOLMAN: To cover the gap between what# the government spends and what it collects,## we sell IOUs, call them bonds.

About a# fifth of our debt is held by different## parts of the government itself,# while the rest is held by the public,## which includes foreign governments,# investors and folks like you and me.

We rely on this debt to help fund the government.# In 2024, that included about $4 trillion on## benefit programs like Social Security, Medicare# and Medicaid, and nearly $2 trillion defense and## basically everything else.

In all, the U.S. spent# $1.8 trillion more than it took in, contributing## to a national debt that we have been building# on and off since the country's founding.

LIN-MANUEL MIRANDA, Actor: Welcome to the# present.

We're running the real nation.

PAUL SOLMAN: Before he was a Broadway# star, our first treasury secretary,## Alexander Hamilton, called the young# nation's debt the price of liberty and,## in the aftermath of the Revolutionary# War, advocated for the federal government## to take over state debts to cement# the colonies into the United States.

LIN-MANUEL MIRANDA: If we assume the debts,## the Union gets a new line of credit, a# financial diuretic.

How do y.. PAUL SOLMAN: The pace of borrowing has ebbed and# flowed with peaks due mostly to wartime spending,## though, generally, the borrowing# ebbed after a crisis was over.

But## in the aftermath of spending on the war# on poverty and Vietnam back in the 1970s,## spending again started to rise and hasn't stopped.

KENNETH ROGOFF, Economist, Harvard University:# Our debt relative to our income has doubled## in the last 20 years.

It has quadrupled# since 1980.

We borrow very promiscuously,## particularly during the financial# crisis and during the pandemic.

In fact, as things stand now,## we owe about as much as all the other# large advanced economies put together.

PAUL SOLMAN: But what's been happening lately?

NATASHA SARIN: Our society is becoming older,## and so more people are Social Security# beneficiaries and are getting their Social## Security checks.

And we haven't scaled up our# revenue collection in ways that match that.

PAUL SOLMAN: And there have also been tax cuts,## including during President Trump's# first administration in 2017.

DONALD TRUMP, President of the United States: It's# the largest tax cut in the history of our country.

PAUL SOLMAN: Those cuts cost about# $1.9 trillion over just a decade.

NATASHA SARIN: Tax reform, or cutting# taxes, cutting the revenues that we collect,## without raising commensurate revenue# to be able to cover the cost of that## lower tax burden, and the result is# we have every year higher deficits.

PAUL SOLMAN: So the yearly deficits pile up and# keep the total debt swelling?

But so what?

Today,## our debt is approaching levels not seen since# the end of World War II.

At least so far,## our economy sure hasn't collapsed.

Far from it.

KENNETH ROGOFF: If we have problems# -- we could have another pandemic.

We## could have a financial crisis.

God forbid# we could have a war of some type.

And we## will want to borrow a lot.

And the# fact our debt is starting so high,## it's a risk.

It gives us less flexibility# for dealing with these things.

PAUL SOLMAN: Economists say we have gotten a# pass because the dollar is the reserve currency,## meaning it's the most widely used currency in# the world.

But that dominance could be slipping.

KENNETH ROGOFF: Everybody sees, even if# we don't, that we are likely to have a## problem.

And it's not the end of the dollar.# It's not going to collapse.

But maybe they## want to be a little more diversified.# Maybe they want to do other things.

That further pushes up our interest rates.

That## makes it more painful.

And we're# in the thick of this right now.

PAUL SOLMAN: Look, our IOUs are not free.# We pay interest.

And the rate on it,## it's been rising.

In fact, interest is the# fastest growing part of the federal budget pie,## making up about 13 percent of spending in# 2024.

That's more than we spent on defense.## And the interest pie slice is more than# twice what it was just three years before.

NATASHA SARIN: It's not just that deficits are# going to rise and debt levels are going to be## higher.

What I actually worry about# is what it crowds out in the future,## because I think that's going to constrain you from# things like investing in future generations and## children in early childhood education or dealing# with the climate crisis that faces us today.

PAUL SOLMAN: But our debt hasn't# stopped investors from buying it.## And the idea that the U.S. would stop paying# entirely and default seems pretty unlikely.

On the other hand, defaults have happened# in other countries throughout history and## recently after the financial crisis.

NATASHA SARIN: We have seen sovereign## debt crises across Europe, where questions# about the viability of debt in countries like## Greece were raised, and the sort of drag on# those countries, not from just those moments,## but from what drawing into question your integrity# and your security and stability is a place to lend## really, what that means to the economy.# And these aren't short-lived impacts.

PAUL SOLMAN: In Greece, a budget crisis forced# the government to cut spending and raise taxes,## contracting the economy.

Unemployment# reached 27 percent in 2013.

It's a## crisis that took years for# the country to recover from.

So is the U.S. nearing the point# that it can't pay its debts?

KENNETH ROGOFF: We're not going to literally# tell them that we're not going to pay the debt,## but there's, of course, a threat of inflation,# the -- which makes the debt work less.

You get## paid back in dollars that don't buy as# much as when you lent them.

By the way,## that just happened with the excess inflation# that we had in the post-COVID years.

PAUL SOLMAN: And if our dollars are# worthless, the interest lenders would## demand to buy our new IOUs would go up, and the# more we'd have to borrow to pay the interest.

NATASHA SARIN: That interest rate won't just# be the interest rate that the government## owes people who lend to us.

It will also# trickle down to be the interest rate that## you have to pay on your mortgage or the interest# rate on your car loan or on your student debt.## And all of that matters to households# in a way that I suspect we're going## to start to feel and we're already really# feeling differently now than a decade ago.

PAUL SOLMAN: So the future of our# debt really matters.

And how much## debt we're about to add is being# determined in Congress right now.

For the "PBS News Hour," Paul Solman.