It's no secret that America runs on credit. Earlier this year, the Federal Reserve reported that aggregate consumer credit debt totaled $1.027 trillion, a new record high that surpassed the previous high hit before the Great Recession. But what consumers owe lenders is a drop in the bucket compared to what the U.S. government owes its citizens and the rest of the world.

According to, the U.S. national debt is $20.37 trillion and climbing by the minute. This works out to about $62,500 per citizen, or nearly $169,000 per taxpayer. Not only is this total debt figure increasing with regularity, but the interest payments on this debt are expected to rise as well. You see, as the Federal Reserve tightens monetary policy by lifting its federal funds target rate, interest rates will rise. That means higher borrowing costs for the U.S. government, which could make paying down the national debt all the more difficult.

A debt ball with a chain attached to a bear trap.

Image source: Getty Images.

The shocking growth rate needed to pay down our national debt

We as citizens have been hearing lawmakers on Capitol Hill discuss paring down the U.S. national debt for years, if not decades, but many of us have no real clue as to what it would take to get the job done. In other words, we don't know what growth rate would be necessary for the U.S. economy to generate enough extra capital that we could finally begin paying down what we owe foreign countries and our own citizens. A recent CNBC interview with Republican Policy Committee Chairman Luke Messer (R-Ind.) shed light on this answer, and you frankly may not like what you're about to read.

Messer, while discussing tax reform policy on CNBC's Squawk Box, suggested that "If we want to pay down the debt and deficit ... the only time we've done that in modern history is when we've had 4% growth." That's right, folks. The GOP Policy Committee chairman is saying we have no chance of paying down our national debt unless the U.S. can achieve 4% GDP growth a year.

How common is 4% GDP growth in the U.S.? Utilizing annual GDP data from the World Bank, we find the U.S. hasn't achieved a 4% GDP growth rate since 2000, when the figure hit 4.1%. And much of this growth was likely due to the explosion of the internet and the emergence of business-to-consumer and business-to-business commerce. Replicating this sort of game-changing advancement today would probably be incredibly difficult.

Messer went on to say that "our No. 1 target in these tax cuts should be what's the path to 4% growth."

But can Trump's proposed individual and corporate tax reforms get us to 4% growth? Initially, I'd say I'm skeptical.

President Trump addressing Department of Homeland Security employees.

Image source: U.S. Department of Homeland Security via Flickr.

The give and take of Trump's tax plan

For those who may not recall, last month President Trump introduced a more concrete outline of what to expect from tax reforms. On the individual side of the equation, the standard deduction would be roughly doubled, while a number of deductions would be eliminated to simplify the tax code. Also, the current seven federal income-tax brackets would be condensed down to three, or possibly four, depending on whether the wealthy get their own bracket in the final version of the bill.

On the corporate side of the equation, businesses would see their peak marginal income-tax rate fall from 35%, which is among the highest in the world, to 20%. Trump had previously suggested that 15% was an "ideal" target for corporate taxes, but the inability to repeal and replace the Affordable Care Act, and the long-term savings that would have been derived from healthcare reform, makes a push down to 15% seem all the more unfeasible.

Will these moves be enough?

On one hand, since the U.S. economy is 70% driven by consumption, putting more money into the pockets of consumers via individual tax cuts should be a good thing. Likewise, allowing corporations to keep more of their profits should result in more hiring and better wages for workers. President Trump has previously suggested that 3% GDP growth is reasonable with his tax plan.

A man in deep thought while surrounded by boxes of paperwork.

Image source: Getty Images.

But this tax plan fails to account for the normal ebb and flow of the U.S. economy. Recession and slowdowns are a normal part of the economic growth cycle, and the Trump administration seems to be overlooking the very real likelihood that even if 4% GDP growth were achievable, it probably wouldn't last for more than a couple of years, at best.

Trump may also wrongly be assuming what corporations will do with their extra cash. Rather than hiring new workers or reinvesting in research and development, it's always possible that large public companies could return this capital back to shareholders in the form of a dividend or share-repurchase program. There's nothing Trump can do to dictate where this cash will flow, and that's a major question mark that hangs over tax reform.

Put plainly, I don't see how the U.S. debt situation gets any better anytime soon, tax reform or not, and that's a scary thought.