America’s most unaddressed gigantic problem is the $35 trillion national debt. It’s rapidly growing to unsustainable levels and Americans are eventually going to face some unhappy choices.

Neither of this year’s presidential candidates — incumbent Democrat Joe Biden and Republican challenger Donald Trump — is leveling with voters about the sacrifices that loom. Biden wants to raise taxes on businesses and the wealthy without touching benefits in the budget-busting retiree programs, Social Security and Medicare. Trump pretends that some new tariffs on imports and more supply-side tax cuts will magically solve the problem.

Virtually no politician tells the truth about how to fix the debt because the real answer is that there’s something for everybody to hate. Tax hikes, spending cuts, and benefit reductions are all inevitable, and that message upsets so many voters that telling the truth and getting elected mutually exclude each other.

Yet there are solutions. In a new analysis for the Manhattan Institute, budget expert Brian Riedl outlines a range of actions Congress can take to stabilize federal borrowing and forestall a debt crisis that would cause soaring interest rates, runaway inflation, or both. The United States doesn’t need to pay off its entire national debt. It just needs to peg it at around 100% of GDP and keep it there. And the actions Riedl outlines are not the draconian ones that will be necessary if Washington dawdles, as usual, and waits until the last moment to address the problem.

There are a few truisms of debt math. One is that taxes on the wealthy are going to have to go higher, because that’s where the money is. The share of national wealth controlled by the top 1% of earners has risen from 14% in 1990 to 16.8% at the beginning of 2024, while the share for the bottom 50% has dropped by a bit. Higher taxes on the wealthiest Americans would restore some balance lost during the last 30 years.

Another inevitability is that better-off seniors are going to have to pay a little bit more and take a little bit less, because they get a disproportionate share of federal benefits. Many Medicare and Social Security recipients mistakenly believe that they’ve banked contributions they’re fully entitled to once they retire, but that’s not how these two programs work. Instead, both programs are broadly funded by current workers paying for enrollees according to benefit schedules that, in some cases, were established long ago, when life expectancy was lower and retirement life very different.

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Current Medicare and Social Security enrollees shouldn’t complain because most are getting more than they put in. The average retiree today will have paid around $176,000 in Social Security taxes and will get about $238,000 worth of benefits, adjusted for inflation. For Medicare, lifetime taxes are about $48,000 while benefits will total $298,000, also adjusted for inflation.

Part of the reason the federal budget outlook is so gloomy is that the total cost of Medicare and Social Security is exploding as baby boomers flood into the programs, and there aren’t enough incoming workers to pay all the benefits owed on the current schedule. The ratio of workers to retirement beneficiaries has dropped from 5.1 in 1960 to around 2.9, and it’s headed to 2.5 by 2030. Fewer workers are financing benefits for more retirees, and both programs are due to run short of money in the early 2030s.

One way to keep benefits whole might be to simply raise the payroll taxes that finance Social Security and Medicare, or raise the ceiling on the Social Security tax, which only applies to the first $168,600 of income. But at some point, that distorts the whole point of these two programs, which were meant to keep seniors out of poverty — not pad the lifestyles of the elderly at the expense of younger Americans still trying to build families and careers.

Social Security and Medicare have largely worked by providing stipends and last-resort health coverage to vulnerable seniors. At the same time, today's retirees have become the wealthiest demographic in American history, thanks to the booming economy of the 1980s and 1990s, an 11-fold increase in stock values during the last 30 years, and a threefold increase in home values. Many retirees own their homes outright or have small mortgage payments, with ample savings and no childcare burdens.

Not all seniors are wealthy, of course, but as a whole, older Americans control more wealth than any other cohort. The average net worth of people between 65 and 74 is $1.8 million, the most of any age group, according to the Federal Reserve. The second highest is for those 75 and older, with an average net worth of $1.6 million. The Wall Street Journal recently reported on the rapid growth of retirement towns in the South where baby boomers party “like they’re at college, except they don’t have to go to class and they have $3 million in the bank.”

Social Security and Medicare are the nation's costliest social programs, yet the benefits flow to America’s wealthiest demographic. Raising taxes to keep those benefits at current levels would amount to “the largest intergenerational wealth transfer in world history,” Riedl wrote in the Manhattan Institute analysis.

His set of solutions involves reasonable sacrifices for those who are able to give, as the chart above illustrates. Riedl would keep Social Security and Medicare benefits fully intact for the bottom 40% of enrollees, by income. But he’d enact modest benefit cuts for the top 60%, while gradually raising the Social Security retirement age from 67 to 69.

There would also be select tax hikes on businesses and the wealthy, to include raising the top individual income tax rate, raising inheritance taxes that involve capital gains, and paring back some business tax breaks. Defense spending and other so-called discretionary outlays that Congress has to approve every year would have to be capped or reduced.

At least two changes would directly affect ordinary workers. One would be a 1-point increase in the tax that funds Medicare, with workers and employers each paying half. Another would be taxing part of employer-provided health benefits as income, which would be a de facto tax hike.

Most working taxpayers can find something in this outline of proposals that would make them worse off. In a way, that’s the point: The nation’s massive debt load can’t be fixed while exempting any large constituency.

But it’s also worth noting what’s not in Reidl’s plan. There’s no value-added tax, which would be a kind of national sales tax bringing in tons of new revenue paid by consumers — similar to what most wealthy nations have. There’s no large business tax hike that could make the United States less competitive with low-tax jurisdictions and generate new tax-shelter schemes. There’s no hike in the Social Security tax. And there’s no call to slash Medicaid or shred the social safety net that mainly benefits the poor.

Liberals might prefer to address the problem with more tax hikes and bigger cuts in defense spending while leaving most social benefits intact. There are plenty of options. The Congressional Budget Office regularly lists ways to tackle the job, including higher taxes on businesses and the wealthy and big cutbacks in spending on defense, roads, airports, law enforcement, national parks, and everything else the government does.

But everything comes with trade-offs, and unintended consequences can make the problem worse instead of better. If tax hikes are too steep, they'll kill growth at a time when the budget squeeze leaves less margin for error than in the past. Defense cutbacks could backfire in a world with hot wars in Eastern Europe and the Middle East and a new axis of mayhem involving Russia, Iran, North Korea, and possibly China.

Up until now, every partisan plan to wrestle the national debt has been a non-starter because it's politically popular with one large faction but politically toxic to another. When the politicians start producing plans that nobody likes, they might finally be getting somewhere.

Rick Newman is a senior columnist for Yahoo Finance. Follow him on Twitter at @rickjnewman.

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