Did you know that the last time the United States of America spent within their budget was 1969. Since then, our country has spent more money each year than it has collected in revenues. The difference, the money that must be borrowed to bridge this gap annually, is called the budget deficit. The amount of money over the use over the years to finance our deficit is know as the National Debt. The National Debt increases by approximately one billion dollars every working day. Our debt currently stands at approximately $6 trillion. That tremendous figure breaks down to roughly $50,000 of debt per American family and over $20,000 of debt for every man, woman, and child in the United States.
What will it take to get rid of this debt? Through out the years many different proposals have been suggested. Some have been radical while others have been more conservative. It is no surprise that most people do not even blink when they hear these tremendous debt figures. Most Americans have simply closed their eyes and ears when hearing and reading about this problem. However, learning more about the debt and the deficit is to our benefit because it will affect how we live our lives today and in the future. This term paper will examine what changes the government can do to reduce the national debt and deficit and the consequences that will result if the problem is not addressed.
The causes of the debt
A. The national debt is like a credit card bill
When I think of the national debt dilemma in the United States I get reminded of a young person who gets a credit card. This person gets really excited and starts spending money everywhere. He does not care what he buys, he goes put shopping buys everything he wants and even treats all of his friends. After all he can pay for it later, right. Well, soon after he gets his credit card the bill arrives. And he can not believe the amount. However, he notices a little note at the bottom noting that the minimum amount due is $20. The kid gets really happy and tells himself he knew he did not need to worry. However he did not read the part that said there was 25% monthly interest charge and a $15 monthly finance charge. Paying with just the minimum balance would take years to pay off the debt not to mention all the added cost he would have to pay in interest. . That persons frivolous use of the credit card has led him to financial disaster. That crazy teenager with a credit card can be seen as the United States who went all out at the beginning of his credit history and ended having to pay a tremendous amount of money.
The roots of the National Debt can be traced back to the United States involvement in warfare. Throughout the history of the United States we have been involved in more then a handful of wars. The United States also acted as a big brother and aided countries with both military help and financial help. Where did the United States get money to help all these countries? They borrowed money, of course. They increased our National debt.
Various spending policies have contributed to our current deficit and debt problems. For example much of the waste that the United States is accounted for comes in the form of subsidies and lop sided financial agreements. The government spends billions subsidizing farmers by forgiving billions in loans, buying hundreds of millions of pounds of honey to prop up commercial bee keepers, paying the electrical bills for casinos in Las Vegas, manufacturing fertilizer, producing helium for military purposes, buying land at well over the markets value, selling off huge office complexes it seized as par of the S& L bailout at discount prices, and irrigating the farm land of multimillionaires in Central California. Were you also aware that the “welfare program costs taxpayers $300 billion dollars a year, but if the government wrote annual checks of $14,700 to all 7.7 million poor families in the United States, it would cost only 113 billion dollars a year.”
Another area of waste in the government is its lavish lifestyle. The average American would show disgust if they knew about the private airplanes, limousines, health clubs, and especially retirement benefits that Washington officials have access to. The list of unreasonable expenditures that the United States government is endless. Take for instance the fact that “the government has spent over $3 billion in some years in decorations” is truly outrageous. The government also uses millions of dollars every year to pay for parties! These are just a sample of the things that government uses our tax dollars to pay for. There are many other expenditures that our government quite simply can do without. However, they choose to just add it on to our national debt.
D. Consequences of being in deficit
There are some consequences of having a deficit. The most obvious would be that it increases the national debt. Higher debt causes higher interest expenses, making it much harder to balance the budget the next year. Higher debt whether we like it or not ultimately forces higher taxes, cutbacks in federal spending or both. Higher debt causes bigger drains on the American economy to pay interest to people and institutions in other countries. Defects tend to also drive up interest rates. Higher interest rates moves private money from those that do not have that much to those who have the most. From young to old and from poor and middle class to rich. Higher interest rates also discourage the business investment needed for economic growth. Higher interest rates encourage foreigners to let us borrow money, making the dollar more valuable, which worsens our balance of trade and costs Americans their jobs. As you can see being in debt does have harmful effects on everyone. Something has to be done, everyone must sacrifice a little right now to gain more later.
E. What can the government do to reduce the debt
As mentioned before the United States does not look for the most economic ways to run the government. Inefficiency abounds in almost every governmental operation. Waste and inefficiency are everywhere in government. Rather then ignoring of excessive government spending, the government can fix it by identifying and eliminating waste and efficiency.
The United States government must stop and smell the coffee. Year after year they have pulled strings to create loopholes to supposedly balance the budget. Moves like counting the social security revenues as surplus, and over estimating revenues for the next fiscal year, and manipulating payments dates to the convenience of the government have created even greater defects every year. If the United States keeps on doing this they will just be fooling themselves. They might make things better in the short run but in the long run it will just create more economic instability. They must stop running up a tab and
If the government want to balance the budget and reduce the debt it must first analyze its major spending expenditures. The most obvious would be the national defense. The national defense accounts for more than 1/4 of the annual budget. Yes, you read correctly 1/4! If anything is going to be done it must first start out here. The government seems to prefer to be more of a macho hero than to help out it’s people. Quite frankly having such a big percentage off money allocated for defense is not necessary. For instance if the United States government sacrificed just a little more on military research and development, eliminate some types of tactical fighters and helicopters, limit spending for support equipment such as trucks, office equipment, and training devices, or cancel Army weapons that may be unnecessary or ineffective it would save almost $10 billion. Another area that could use revision is the economic aid that the Unites State provides allies and friends. The United States must stop acting like a big brother and stop helping themselves. If just one half of foreign aid was cut in half it would save tax payers $9 billion.
Medicare is also a costly expenditure in the federal budget. If new cost control measures were imposed to persons with family incomes of over $35,000, Medicare would save $10 billion. Reorganizing assistance to the poor would also save the government alot of money. For instance it can re-evaluate who can and can not get government assistance. An example of a proposed reduction could be that welfare be only given to people who are physically incapable of working. This would save an estimated $25 billion annually
The federal government provides over $100 billion a year to state and local government. If the United States government were to eliminate projects with primarily local impacts, such as local economic development and money to operate local bus and subway systems it would save $20 billion dollars.
It is true that everybody hates to hear about taxes. However, if the deficit and national debt are going to be reduced they must also play an important role. For instance if the sales tax in every state was increased by just one percent it would add $15 billion to pay for the debt.
Another option would be to “freeze” government spending. This does not mean to stop government spending completely, but just to not increase it any further. As you have read it is possible to reduce the government debt. However, the government must first know that we care.
F. What you can do to reduce the national debt
So often when we hear of economic problems and government decisions, we close our eyes and ears. Our vision is confined to our small, private worlds. We tend to take the attitude that we can do nothing about it. The opposite is closer to the truth. There is almost nothing you can not do. Do not ever forget that we live in a democratic society that depends on our involvement. The solutions to our problems are not in the governments hands but in our hands. We must first be aware of what the problem is. We need to understand the severity of a debt of $6 trillion. We must be informed about the hidden debts that our government does not readily disclose us of. And we must be educated about how we pay the debt through taxes and inflation in our daily lives.
We must support our local congressman and senators. They will listen to our guidance if we offer it. After all they depend on voters votes to stay in office. We must let them know we care how they spend our money. The governments instinct is to spend, never to save. We need to administer shock treatment to our elected representatives through letters. Many times a few letters will have a great affect on the stand a congressman will take and then later vote. We should express them an opinion on specific budget-cutting options, so we can provide some input on some choices we might favor. Another thing you can do is join with others. Organizations already exist that address the issue of decreasing the national debt from a variety of political perspectives.
This paper has examined the roots of the current debt and deficit, analyzed the spending policies which have contributed to the problem, and discussed some of the solutions that the government can take and that you can take to reduce the national debt. With the fact presented it is clear that the national debt can be reduced. It will take planning and sacrifice in the part of everyone. Failure to take these actions will only postpone our governments need to come face to face with its habit of spending money which it does not have. If this is not taken seriously already serious economic and social problems will never solved, and will only make things worse for our future generati