Congress must focus on debt reduction
the American economy.
Many years of federal government spending that exceeded income caused the current deficit, and the interest payments alone on the bonds issued to pay for government programs have been estimated to be $363 billion for the federal fiscal year ending on Sept. 19, 2019. As interest rates rise, the amount of future interest the government must pay holders of its bonds will only increase.
The Treasury secretary says “the combination of recent tax reform and regulatory relief will fuel higher gross domestic product growth and help erase (this fiscal year’s) deficit,” but a recent Goldman Sachs report warned that rising debt and deficits as projected by the nonpartisan Congressional Budget Office will create “substantial risks for the nation.”
Perhaps the most alarming fiscal statistic is the national debt-to-GDP ratio. (GDP is the value of all goods produced and services provided by a country in one year.) When that ratio is 100 percent or greater, concerns typically arise about a country’s ability repay its debt, and its currency and international economic standing falters. The total U.S. debt level of more than $19 trillion is more than 100 percent of the GDP as calculated by the CBO.
What steps can be taken to address the federal deficit issue and create a foundation for lasting national economic growth and fiscal responsibility? Will politicians continue to “kick the can down the road?”
• For starters, voters must ensure their elected officials are guided by the national interest more than their own. Seriously reforming campaign financing and thus curtailing the influence of special interest groups who line politicians’ campaign coffers would encourage politicians to take a longer view of issues including deficit reduction.
• Reducing waste, abuse and fraud in government spending is a must. Three of the largest parts of the federal budget — Medicare, Medicaid and the Defense Department — are rife with savings opportunities. The FBI has estimated Medicare fraud is anywhere from 3 to 10 percent of its budget. An internal 2015 Pentagon report was reported to have identified a “clear path” for the Defense Department to save $125 billion over five years through attrition, early retirements, curtailing high-priced contractors and making better use of information technology. The highly regarded, bipartisan Simpson-Bowles Report in 2010 offered policy proposals to reduce the deficit, including capping government spending at 21 percent of GDP, reducing mandatory spending for areas including Social Security and the military and ending tax loopholes. While not embraced for political reasons, the report’s recommendations are needed now more than ever.
• We must be courageous enough to tackle the sacred cow of Social Security. When the act enabling the program designed to provide income to those 65 or older was passed in 1935, the average lifespan of Americans was 61.7 years. Although the average lifespan of Americans is now 78.7 years, the age for maximum Social Security payments is just 67. Those over age 65 will comprise 20 percent of the U.S. population by 2025. Long-term funding for Social Security can be ensured by gradually increasing the eligibility age and instituting “means testing” favoring the most economically vulnerable. By steadily reducing Social Security expense, Congress could limit program cost increases or even reduce the Social Security income tax paid by U.S. workers, including our children.
By instituting measures such as those above, Congress could avoid draconian spending cuts and/ or dramatic tax increases that would be needed to reduce a ballooning deficit in the future. Significantly reducing the deficit could result in lower bond interest payments and free up funds for initiatives that could create jobs and stimulate the economy.
Like the individual who doesn’t want credit card charges to eat up too much of his/her discretionary income, the government must reduce its spending. Living within our national means requires us to take strong action now to address the debt crisis.