In one sense, for better or worse, our growing public debt has put trillions into the pockets of the American people. There’s an economic principle known as “Wagner’s law,” which holds that as a country gets wealthier, its tax burden tends to increase. Wagner’s law makes perfect sense: in a poor country, citizens are happy to have a paved road; in a middle-income country, they expect a public school on that road; and in the wealthiest countries in the world, the public expects safe air-traffic control to guide them into an airport where they can catch a cab to a world-class public university. As the expectations of what we want government to do rise, so do the tax revenues that are necessary to pay for it all.
Wagner’s law holds true for every country in the world except the United States, where conservative economic discourse prevails. Thirty years ago the Right convinced a lot of Americans they could enjoy tax cuts without losing out on any of the services they’d come to expect. That’s a big part of why our public debt jumped from $997 billion when Reagan took office to over 14 times that number today.
We could have paid for everything as we went through higher taxes but we didn’t – in 2008,we ranked 26th out of the 30 countries in the Organization for Economic Cooperation and Development in terms of our total tax burden (the share of our economy we fork over to the government), coming in almost 9 percentage points below the average of the group of wealthy nations.