I heard some scary things this weekend. Things like masked men with chainsaws chasing down folks in the Cal Poly corn maze and CNN’s report that the hate crimes legislation hidden in the defense spending bill has been signed into law by Obama. However, the spookiest thing I heard was the report from the Bureau of Public Debt: as of Monday, America is $11,868,457,477,911.94 in the red.
Obviously, $11.9 trillion will not pay itself back. This debt must be repaid by the borrower: the U.S. government. The primary source of revenue for the U.S. government is taxation; this means that to pay down this debt, the government will have to decrease spending or increase taxes. Judging from history, the chance of a significant decrease in government size and spending is unlikely until a total government overhaul occurs. Therefore, that $11.9 trillion will be paid by you and me, the taxpayers.
Consider this: the U.S. Census Bureau reports that as of July 2008 the U.S. population is 304,059,724. This means that if the national debt were split evenly over the entire population, each person would owe $39,033. Ignoring the fact of ever compounding interest and growing government spending, to pay back the federal deficit right now, the federal government would need to take $39 thousand out of your bank account. I understand this is a simplistic view of national debt; however, increased taxation is one of the few options that would allow government to maintain its current size and spending habits. If taxes were used to pay down government debt, taxation would have to grow with federal spending. This would mean more and more of our hard earned dollars would be taken away. Money we could use to buy groceries, textbooks and fuel would be given to the government to pay down ever increasing national debt.
The Government Accountability Office’s Citizen’s Guide to the 2008 Financial Report of the United States Government reports: “The Government’s fiscal policies for these programs as currently structured are not sustainable. Without changes, spending for Social Security, Medicare, and Medicaid would permanently and dramatically increase the Government’s budget deficit and debt, leading eventually to renewed financial and economic instability.” The federal government admits that spending for current government programs cannot continue, as it will lead to financial and economic failure.
An investment in the U.S. federal government has historically been one of the safest investments available on the world market. The United States has never failed to repay its debt. However the risk that the U.S. could default on a loan increases as it takes on more debt. The Government Accountability Office estimates that growing obligations in entitlement spending will cause these program’s mandatory spending to exceed government revenue around 2030. The Government Accountability Office reports that the primary risk category within these entitlement programs is health care costs. Government spending, primarily on social programs such as health care, has pushed the United States to the brink of bankruptcy.
Most politicians ludicrously believe economic failure can be avoided by expanding already bloated government programs. They think that increasing government spending will somehow make our problems disappear. The health care legislation currently under debate clearly shows this. However, no one can spend their way out of debt, not even the U.S. government.
The three available options to address the national debt are: do nothing and remain on the current course to economic failure, increase taxes or decrease government spending. Neither economic failure or increased taxation is desirable. Therefore, decreasing government debt through spending reduction is the only safe and effective way to assure financial stability and sustainability.