The United States, Debt or Alive

Abstract:

There are many opinions on what to do about the US national debt, one thing is clear, the debt needs to be reduced and excess spending needs to be cut, which is possible by making some necessary changes in government funded programs. It is beneficial for people to know about the national debt because it’s an issue that is not going away anytime soon. Some argue that it needs to be eliminated entirely while others say the government shouldn’t bother reducing it. However debt is generally viewed as a bad thing and most people agree it should be reduced. While there are several possible options, the debt issue can be most easily solved by simply implementing a tax on greenhouse gasses. It therefore encourages companies to reduce emissions to avoid the tax and it helps decrease they pollutants released into the environment.

The United States, Debt or Alive

Social institutions and reform movements often define contemporary society; they also divide it. One such topic is the national debt. The US national debt has now exceeded 10 percent of U.S. gross domestic product. Given a substantial amount of this debt is a result of the government’s failed efforts to alleviate the financial crisis, recession and recovery. Thinking that this debt problem is a recent occurrence is tempting; however, it has been an accumulating problem for the past several years. The economy could face major turmoil if the debt is not resolved. While there are many opinions on what to do about the US national debt, one thing is clear, the debt needs to be reduced and excess spending needs to be cut, which is possible by making some necessary changes in government funded programs.

With the topic of debt comes some terms that may be unfamiliar to several people. One of the major terms that is key to the topic is “national debt.” The “national debt” is defined as “The total sum of the outstanding debt obligations of a country’s central government.” Another major term that is used when talking about debt is the “budget deficit,” which is the amount by which total government spending is more than government income during a specified period; the amount of money which the government has to raise by borrowing or by currency emission, which is defined as printing more money, in order to make up for the shortfall in revenues. Going hand in hand with “budget deficit” is the term “budget” which is a statement of a government’s planned or expected financial position for a specified period of time (usually one year). Based on estimates of the expenditures to be made by the government’s main subdivisions, which include, wages and salaries of government employees; consultant’s fees; purchases of equipment, supplies, real estate, etc; and also money transferred to beneficiaries of various programs. All of this occurs during the specified period, along with estimates of the revenues to be realized from the various sources of income that will be available for paying for these expenditures. Next comes “inflation” which is a sustained rise over time in the general level of prices. “Unemployment rate” is defined as a measure of the extent ofunemployed peoplein the labor force at some particular time, and is another term that most people should understand. Furthermore, unemployment is a situation which exists when members of the labor force wish to work at the prevailing wage or salary rates for their skills, but cannot get a job. Another term that is often misunderstood is “tax”, which is a compulsory transfer of money from private individuals, institutions or groups to the state or federal government. One final term that would be beneficial to know it the definition of “debt ceiling,” which is a limit imposed by Congress on how much debt the U.S. can carry at any given time. (Dictonary.com)

The issue of debt is actually nothing new, it began right around the American Revolutionary War when there was excessive spending for the war; however, the government and the founding fathers were very proactive about the debt and did their best to keep it down. John Adams once said “There are 2 ways to conquer and enslave a country. One is by sword. The other is by debt.” (Adams, goodreads.com) Adams also agreed that national debt should try to be avoided by saying “I go on the principal that a public debt is a public curse.” (Adams, goodreads.com) Unfortunately, the following presidents did not always abide by their words. In the 1970s, when the government began to significantly increase spending without increasing revenue, caused a catastrophic effect of debt that has continued to spiral out of control in the past several years. Before Reagan the gross national debt was just aboutone trillion dollars. After Ronald Reagan’s presidency, the debt was up to2.9 trillion dollars. After George H.W. Bushit was $4 trillion, Clinton$5.6 trillion. George W. Bush, pushed it past$10.6 trillion, and now Barack Obama has raised it to more than $16.4 trillion. As of April 1, 2014, the official debt of the United States government is $17.6 trillion. This results in the debt equaling $55,372 for every person living in the U.S. (Agresti, Justfacts.com) As Herbert Hoover once said “Blessed are the young for they shall inherit the national debt.” (Hoover, brainyquote.com) the debt that everyone owes now will be eventually passed on to the next generation, and that is why something must be done, the economy cannot afford to keep this level of spending.

National debt is important due to the fact that high national debt can lead to reduced national income and living standards, higher marginal tax rates, higher inflation, and a decrease in the purchasing power of money. The logical thought is that the debt needs to be reduced. As Paul Ryan stated “Over time, lower federal debt leaves more funds available for private investment and thereby causes output to be higher than it would be otherwise. Higher federal debt has the opposite effect, “crowding out” private investment and decreasing output.” (Ryan, cbo.gov) Not only would the increased debt decrease output, but higher debt levels also equal fewer jobs and lower wages. Consumers and businesses reduce investment and higher government borrowing can also drive up interest rates once the economy recovers, which can result in fewer jobs and lower wages in the long run. Increasing national debt means that Medicare and Social Security may face abrupt, severe, and widespread cuts in the future. Federal debt increases interest rates throughout the economy. Resulting in higher interest rates and more expensive credit for people across the country who may be taking out loans for a home, a new car, paying down credit card cards, or for education costs.

There is the argument as to what good paying down the national debt would actually do. The core of the issue is that usually being in debt is viewed as undesirable. This generation is supposed to “protect our children and grandchildren from the “damaging” effects of inflation” (Buchanan, “What Do We Owe Future Generations?”) In order to achieve such a feat, however, the government would need to collect tax revenues that far exceed annual spending. With the current 17 trillion in debt that is held by the public and even with no interest paid on that debt, it could be repaid by having taxpayers pay an additional 500 billion dollars more in taxes every year and even then it would still take 25 or more years to pay it off. (Thornton, U.S. Debt Problem) Not only is this a political nightmare waiting to happen, but it would also be bad for the economy in the short and long run. Once the debt is paid off, what is stopping the government from just running it up again? The major flaw with the national debt is that most people are oblivious as to how it affects them, and even those who are “informed” about it do not fully understand. Therefore, it does not matter that the government continues to raise the debt ceiling, increase spending and borrowing from China and other countries, but at the rate this is occurring, it would be wise for Americans to start learning Mandarin Chinese. The nation has dug itself so far into debt that, “The only way America will balance our budget and end our out of control debt to China, once and for all, is through shared sacrifice by ALL Americans… along with addressing serious structural economic issues in America.” (National Debt, reformparty.org) To begin to fix the national debt would additionally help address the capitol’s ” irresponsible governance” (National Debt, reformparty.org) putting the nation on the road to financial recovery. Not only is the debt a financial issue but also a leadership issue.

In order to begin to reduce the debt there are several cuts that the government take to reduce spending, and some ideas that could be put in place to generate revenue. While it may not be the initial thought of most people on how to save money, one easy way would be to reduce the size of the military. If the military was reduced it would save the government approximately $495 billion annually. (Thornton, U.S. Debt Problem) The argument is that a reduced military would make us more susceptible to attack, and while this is valid, consider how long it has been since there has been a significant need for the military to defend U.S. soil. If this trend of increasing the deficit continues there should be no need for an exceptionally large military in the near future. Plus, if other countries facing financial struggle see the U.S. using a reduction of the military as a way to climb out of debt, they might begin to do the same. Along with reducing the military, we could also reduce and/or eliminate all of the foreign aid that we provide to other countries. Foreign aid is also commonly referred to as “corporate welfare” (Kessler, washingtonpost.com). Money that the U.S. gives other countries to try to keep them afloat during hard times. By cutting foreign aid, we could save $40 to $50 billion a year. (Thornton, U.S. Debt Problem) A counter argument is that by cutting foreign aid the possibly of other countries going bankrupt rises and the possibility of war escalates. However, the question then becomes why is the government spending so much money abroad to try to keep other countries afloat, when America is sinking deeper and deeper into debt as a result. Problems at home need to be dealt with before attempting to fix problems abroad. Another source of saving on spending would be to increase the full retirement age for social security. This would save upwards of $93 billion annually. (Thornton, U.S. Debt Problem) The major opposition would be the question “why should people suddenly have to keep working for a longer period of time to receive retirement?” (Watt, theguardian.com). With all of the advances in today’s healthcare and medical services, the ability for people to live longer has greatly increased. This also means that their ability to work for a greater period of time has also increased. Social Security was not designed to pay out to people for 25 years or more, so now with people living longer the government cannot afford to pay out for that extended duration of time. Until now, all of the ideas proposed have been on how to reduce spending, however to get Congress to agree and pass spending cuts is an incredibly daunting task due to the fact that it must pass through both houses and get signed by the president to be acted into law, but by the time all that happens, more often than not political agendas have worked their way into the bill and it actually costs more then it saves. Increasing the stream of revenue then becomes inevitable. When inquiring how to raise additional money for the government, the first idea is always taxes. By increasing individual income tax rates, the government would be able to generate up to an additional $694 billion to put towards paying off the debt per year. (Thornton, U.S. Debt Problem) No one likes a tax increase, but with the debt beginning to be reduced, several benefits would begin to surface, such as decreased inflation, firms more willing to hire workers, and lower interest rates, making the standard of living cost less. Finally, the best option to begin the long road of economic recovery would be to impose a tax on greenhouse emissions. Now one would argue that taxing greenhouse gas emissions might cause higher prices to be passed on to consumers. That might be true initially, however, once companies reduce their greenhouse gas emissions, prices should return to normal. The reason that taxing greenhouse gases might be the best option to begin with is it starts the ball rolling with generating extra revenue to reduce the federal deficit which begins to pave the way for government cuts and other additional revenue sources. Taxing greenhouse gasses is also a positive idea for the economy because it provides an incentive for major companies to reduce their greenhouse emissions; which, in turn, decreases pollution and is, therefore, better for the environment and further reduces spending on greenhouse gas reduction efforts.

National Debt is a growing problem in the U.S. and with the amount owed increasing by approximately 1.5 million dollars every minute, (Thornton, U.S. Debt Problem) this level of spending is not a habit we are going to be able to afford for much longer. If the proper steps are taken to begin to reduce the debt, the nation can slowly begin to work its way out of the financial crisis in which it’s have gotten itself into, and start down the road to recovery.

Works Cited

Agresti, James D. “National Debt Facts.” National Debt – Just Facts. N.p., 26 Apr. 2011. Web. 14 Apr. 2014.

Buchanan, Neil H. “What Do We Owe Future Generations.” National Geographic 77 (2009): n. pag. Web. 09 Apr. 2014.

Kessler, Glenn. “Why Is the National Debt $16 Trillion?” Washington Post. The Washington Post, 04 Jan. 2013. Web. 18 Apr. 2014.

“National Debt.” Reform Party National Committee. N.p., n.d. Web. 20 Apr. 2014.

“Reducing National Debt Will Grow the Economy.” The Heritage Foundation. N.p., n.d. Web. 15 Apr. 2014.

Ryan, Paul. “Budgetary and Economic Outcomes.” Congressional Budget Office. N.p., n.d. Web. 22 Apr. 2014.

Thornton, Daniel L. “The U.S. Deficit/ Debt Problem:.” A Longer Run Perspective. N.p., Dec. 2012. Web. 11 Apr. 2014.

“Top Five Reasons the National Debt Should Matter to You.” Fix The Debt. N.p., n.d. Web. 12 Apr. 2014.

Watt, Nicholas, Patrick Wintour, and Larry Elliott. “State Pension Age To Be Raised.” The Guardian. Guardian News and Media, 05 Dec. 2013. Web. 16 Apr. 2014.