We hear lots of talk about our national debt at various points, usually around election time, so I thought I would examine the issue to see how bad it is. First of all, an explanation: national debt is what our government owes to people and countries who invest in Treasury bills or lend us money.
As I write this, our national debt stands at around $19 trillion. It generally has risen with every presidency except for the presidencies of Jimmy Carter and Bill Clinton. Generally, the way we reduce our national debt is by growing our GDP (Gross Domestic Product) rather than running a budget surplus – which has only happened four times in the past 40 years [from 1998-2001].
Why is our increasing national debt a problem? Can’t we just print more money to pay off our creditors? Of course we can. However, that would devalue our monetary system and cause massive inflation – imagine a loaf of bread that costs $100 or more.
We could also just tear up the notes and tell our creditors, “We ain’t paying. Get over it.” But that would lead to another set of problems – people and countries refusing to invest in the United States.
So the problem is that we’re spending an increasing amount of our money on paying back those people/countries who lent us money, which means we’ve got less money to spend on things like roads and the power grid and water mains, not to mention government programs like Social Security, Medicare, defense and education.
We haven’t reached a crisis point yet and some, mostly on the left, will say we needn’t worry about the national debt because of that. There’s plenty of time, they say, to fix the debt problem once we’ve fully recovered from the great recession – put people back to work in good jobs with decent wages.
Others, mostly on the right, say we’re close to an apocalypse of sorts. They say if we don’t act now, lenders and investors will demand much higher interest rates and we’ll spend even more on our debt than we currently do, leaving us that much closer to the raggedy edge of bankruptcy.
Many folks think our debt to GDP ratio should be less than 60%. Currently it sits at perhaps 100% or more. Some believe we shouldn’t even be talking about our debt in such a simplistic way because there are many complex ways of looking at the issue. However, what is clear is that we’re on an unsustainable path.
One way to reduce our debt is to cut our ridiculous military expenditures. For example, we have approximately 600 military bases in 40 countries around the world at an annual cost of perhaps $100 billion. About 250 of those bases are in Germany and Japan – remnants of WWII. Why? Mostly to benefit military contractors.
Another way is to stop our subsidies to the wealthy, offering loopholes that allow millionaires to deduct the cost of their private jets, for example.
But these adjustments aren’t enough, in total, to solve the problem. What is required is national sacrifice. Everyone has to suffer a little pain: the wealthy, the middle class and the poor. We need to tweak Social Security (raising the age of entitlement, perhaps, to around 70). We need to replace the current tax code with something that doesn’t contain thousands of exemptions and credits that sophisticated (rich) folks can exploit.
Everyone must pay. The more one makes, the more one should pay. But everyone should pay because we all use the system. We all reap the benefits. Unfortunately, that kind of approach won’t sell until we reach our moment of crisis – until we’re so far in debt that jobs are scarce and the economy is in tatters.
Any politician who advocates this kind of approach will lose the next election because we don’t want to pay until we’re forced to do so. Even then we won’t want to, though we might concede it’s necessary. I wish I had better news. I wish there was an easier way, but I just don’t see us saving ourselves until we’re forced to do it.
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