By Amy Payne, Heritage Foundation
You’re busy. So busy you barely have time to read these words. So why should you care about the U.S. debt? Does it affect your life?
Unfortunately, high government debt is having more of an impact on each of us than we realize. Heritage’s Romina Boccia explains that high levels of federal debt are linked to all of these problems for Americans:
Higher interest rates on mortgages, car loans, and other loans. For many people, this means having to wait to buy a home. High interest rates on loans can prevent people from getting a loan to start a business, make home improvements, or further their education.
Higher inflation. We’ve already seen food prices rise over the past few years. Higher inflation hits the poor and middle class hardest, because hard-earned dollars don’t go as far. Food, clothing, and medical care all cost more. Seniors who are living on fixed incomes can see their savings dwindle. People who are in the middle class can start slipping toward the poverty level.
Keeping the economy down—and driving it down further. Deficit spending by the government is not separate from the economy; in fact, it drains money from private savings, which means fewer people are investing in the economy. In short, high debt kills jobs. It lowers wages and salaries as it drags the whole economy down.
Boccia notes that “Publicly held debt in the United States will exceed 76 percent of gross domestic product (GDP) in 2013, and chronic deficits are projected to push U.S. debt to 87 percent of the economy in 10 years.”
By the time today’s 6-year-olds are driving, the level of the U.S. debt will be teetering on 90 percent of the entire economy. Research shows that economies that reach this level suffer from long downturns in economic growth.
That’s the last thing we need—unemployment has already been stuck in neutral for the past four years, and our economic growth has been sluggish. The Congressional Budget Office has warned that “growing federal debt also would increase the probability of a sudden fiscal crisis” that would “probably have a very significant negative impact on the country.”
It’s difficult to imagine a nationwide strike in America that would ground all flights and shut down all services. Or an exchange of Molotov cocktails and tear gas between protesters and riot police. Or protesters torching banks, resulting in the deaths of innocent bystanders. That’s where Greece’s debt crisis took that country—eventually, Greece’s lawmakers had to start making the tough decisions and cutting back on spending. The cuts were painful, and the citizens revolted.
This is the track we are on. Right now, cutting spending and reforming entitlement programs in a gradual and predictable fashion may not be politically popular—but as Greece teaches us, waiting until a crisis forces lawmakers to make much more drastic policy changes can end badly—very badly. Our lawmakers should learn the lesson Europe is teaching us: Procrastinate on this massive debt at your own peril.
Boccia warns that “U.S. public debt is far too high at more than three-quarters the size of the economy—and growing federal spending, especially on entitlements, is quickly driving debt to damaging levels.” The solution is that “Congress and the President should take firm and immediate steps to balance the budget within 10 years, by cutting spending and reforming entitlements.”