United States ran up big debts during the global financial crisis and the recession in the aftermath trying to stimulate the economy and make sure that we didn't deep dive into an even deeper recession than where we already were. That makes sense because if you're in the middle of a downturn it's not a good time to put on the brakes with fiscal austerity, raising taxes to raise more money, and cutting spending to tighten the government's belt.
It especially doesn't make sense if you can borrow at low interest rates. And during the recent crisis, the United States could borrow at some of the lowest interest rates in its history, and that's why our debt problem is not as urgent as a lot of people may say. Right now the debt service that we pay, that's the interest payments that we pay all the time, are at a very low rate. In fact, they were much higher during the Reagan and first Bush Administrations.
This may not last forever because interest rates can rise, just as they can fall. And if interest rates do rise, which typically happens when the economy recovers and there's more demand for credit, then we will have to start paying a little bit more and we'll have to start thinking more about how we're going to close that big debt gap.
We have several years before that happens, though, so we can phase in a nice gradual solution without making any sharp cuts to spending and without making any sharp increases in tax rates. But over the long term, there's no doubt – we need to cut spending a little bit and we need to have higher tax rates because right now we have some of the lowest effective tax rates since the 1940s and at a time when people expect more than ever from their government. We'll have to deal with Social Security and Medicare, too, but we typically do that by extending the retirement age a little bit, cutting benefits a little bit, and maybe we'll even remove benefits from some higher earners.
All of these things together will help us to close our debt gap, but we don't have to do it in a sharp shocking way today. We have a few years of runway to do it.
It's definitely not a good idea just to kick the can down the road and let the next government deal with it. It's tempting to do that because people in this government are more concerned about re-election than what might happen ten or 20 years from now, but we can use the time that we have to phase in these changes so that there aren’t abrupt dislocations in our economy. A responsible Congress would act now setting a plan that would phase in these changes over the next five to ten years.