By Chris Giglio
This past Wednesday, an executive commission released a proposal on how to start tackling our $14 trillion national debt. The draft bill would erase $4 trillion of our projected debt by 2020 and bring the annual budget into balance by 2015. Though this draft bill has its problems and is unlikely to pass, it does focus our attention on a problem that is too often pushed to the side: the problem of a debt that is spiraling out of control.
There are serious implications down the road if we don’t start addressing this problem. One is the risk of losing our AAA bond grade, which would substantially increase interest rates on the loans we take out. This would in turn make it much more difficult to finance our debt.
Another concern is that countries such as China will start spending the huge reserves of U.S. dollars they currently hold. This would inject massive amounts of dollars into the U.S. economy and consequently drive down the price of the dollar. We would then face an inflation level that would put U.S. export companies at a disadvantage and drastically decrease consumer demand. People also worry that as foreign countries continue to accumulate U.S. debt, they will have more and more leverage on our policy decisions.
These looming problems are not complicated ideas that our government officials don’t understand. The truth is almost everyone in the House and the Senate is aware of the problem, but no one has the political will to do anything about it. This is because politicians fear that the long-term solutions of cutting spending and increasing taxes will lose them their constituencies.
Politicians succumbing to these pressures can still take action to get our economy on the right path. This would involve focusing the current stimulus packages on programs and investments that actually grow our economy. That seems simple enough but apparently this notion gets lost somewhere in the process. It is amazing to me that after $14 trillion down the hole we still have a deteriorating infrastructure, a manufacturing sector in decline, a declining education system and a widening gap between the rich and the poor.
But more effective government investments is only the start. At some point we will have to increase taxes and start cutting Social Security and health care costs that are set to explode in the next few decades. Every year we wait, the harder the effect of balancing measures will be on Americans. For this reason I hope we find the courage to balance our budget sooner rather than later.