The federal government spends hundreds of billions of dollars more each year than it collects in taxes. Those large budget deficits are financed by issuing growing amounts of debt. Federal debt now totals more than $13 trillion, or about $107,000 for every household in the nation.

Accumulated federal debt has doubled over the past seven years, and it will keep growing unless policymakers enact major reforms. High and rising debt harms the economy, and it will impose a large burden on future taxpayers. It could also lead to a financial crisis, like we have seen in Greece and other nations.

Historically, federal debt has spiked during wars, but lawmakers have always reduced the load when crises subsided. Recently, however, deficits have been chronic and official projections show a nonstop gusher of red ink in coming years. When measured as a percent of the economy, federal debt has never been as high during peacetime as it is today.

A new Cato bulletin looks at the history of federal debt and describes five types of harm that it causes. It concludes that policymakers should cut spending to balance the budget and reduce debt. In the near term, that would spur economic growth by reducing the distortions caused by most federal spending. Over the longer term, it would boost capital formation, increase macroeconomic stability, and reduce pressure to impose harmful tax increases.