Hello folks! Today I wanted to talk about one of the major concerns, that I have been analyzing, and that is the issue of the national debt. One of the most troubling, yet rarely talked about, is the massive national debt carried by the United States. As of today, the U.S. national debt stands at over $20 trillion dollars. That’s over $170,000 per taxpayer, $63,000 per each citizen, that will own a portion of the national debt. Not only does this spell disaster in the future but it represents a gross irresponsibility of the nation’s leaders to manage the fiscal policy for this country. To avoid the troubles that have plagued countries like Greece, Ireland, and Spain, we will need to find viable ways to tackle this debt before it spirals out of control. Therefore, in order to find ways to solve this problem, it is important to understand what decisions have led to this point and what have other countries done to manage their debt problems.
From a historical standpoint, our nation has not held a large a debt-to-GDP ratio since the end of World War Two. With the end of the Great Depression, and the wind down of operations in Europe and the Pacific, the United States needed to find ways to pay down it’s war debts. To solve this problem, the rationale at the time focused around two different theories; Supply-Side Economics and Keynesian Economics. Supply-Side Economics focuses on improving opportunities for businesses and allowing them to explore new opportunities growth. The thought was allowing the free market to foster growth with little interference from government. On the other hand, Keynesian Economics focuses on the idea of government intervention to enhance the markets. Through increased spending, lower taxes, and economic interventions, the government could provide increased opportunities for businesses to recover during recessions. Both options are proposed to restore confidence in the markets and ensure economic stability.
Fast forward to 1981, President Ronald Reagan was sworn into office in the midst of the Cold War. With the federal debt hovering around $1 trillion, President Reagan instituted his 1981 tax cuts to spur the economy and allow businesses to grow. However, the deficit soon exploded because of the Reagan tax cuts and it resulted in the gradual removal of the 1981 tax cuts. This resulted in increase spending that continued throughout multiple administrations. Under President George W. Bush, the attacks of 9/11, coupled with the wars in Afghanistan and Iraq, ballooned the debt to unprecedented levels. By some estimates, President Bush doubled the debt by almost $5 trillion. Even more astounding is the $7 trillion that President Obama added to the debt after the 2008 Recession. Finally, a more recent report stated that we will see an annual deficit of $1 trillion dollars under the Trump Administration. Couple this with the increase in military spending, a new infrastructure bill, and Border Security along the southern border and we could be facing a debt crisis sooner than we expected. What is clear is that every administration, both Democrat and Republican, have drastically increased the federal debt to where we are today.
To tackle this massive debt issue, it is important that we look at various strategies to lower the debt levels. Both Keynesian economics, and Supply Side economics, center around the notion of building the economy to lower the debt-to-GDP levels. However, growing the economy is only one piece of the puzzle. Government leaders will need to take measures to both reduce government spending and raise tax revenues to adequately fund government programs. Another notion to consider is the role of the federal government in providing the level of services that it offers today. Can the Federal Government continue to maintain it’s massive military budget; which at this point is more than the next seven countries combined. Can we continue to fund programs like Medicare, and Social Security, which make up roughly 50% of the federal budget. Another idea to consider is do we shift the responsibility of most federal function to the state level? One of the major differences in state budgets, compared to the federal budget, are that most state budgets are required to balance the budget before they are approved by the Governor. Not only could this provide fiscal responsibility, it could give the states more power to provide responsible programs that are funded through more responsible revenue streams.
To conclude, the state of the national debt is a growing problem that will require action in the coming years. As a nation, we will need to make tough choices in how we can address future fiscal policy. The road ahead will be tough, but if we raise awareness of this issue now, we can take constructive steps towards finding a meaningful solution to the federal debt issue. I hope you found this enlightening and I will see you next time.
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