Essay: The USA can reduce its national debt. It has done it before
As far as the national debt of the United States, according to the Wharton School of the University of Pennsylvania article When Does Federal Debt Reach Unsustainable Levels?: "As of September 30, 2023, the federal “debt held by the public” (herein, “debt”) stood at $26.3 trillion, or about 98 percent of projected GDP...Table 1 shows that between 2040 and 2045---or in about 20 years---the U.S. debt-GDP ratio will hit between 175 and 200 percent under current fiscal policy, depending on the assumed interest rates. The Appendix shows very little difference when instead using CBO’s projections." Research indicates that government debt drags down economic growth beginning at 78 percent of GDP.[1]
The United States dramatically reduced its huge WWII debt ("The fall in the U.S. public debt/GDP ratio from 106% in 1946 to 23% in 1974 is often attributed to high rates of economic growth"[2]).
The three ways that national governments can reduce federal debt are: cutting government spending, raising taxes and helping to increase economic growth so the federal government's revenue from taxes increases. I believe that the USA should focus on cutting government spending and increasing economic growth (More oil drilling, USA eliminating various regulations again like Donald Trump did, etc.).
Regardless, was excessive USA national debt successfully dealt with in the fairly recent past? I ask this question to demonstrate that if it can be done in the past, it can be done in the present.
Let's look at the last 60 years in terms of reducing national debt: "Doing so requires the federal government to generate enough income to pay for all its spending. The U.S. has managed this feat only twice in the past 60 years – and both times involved raising taxes, something Republicans are loath to do. President Lyndon B. Johnson managed to do it in 1969, and President Bill Clinton created a surplus that ran from the fiscal years 1998 to 2001, when he left office... Clinton’s balanced-budget recipe was a mixture of higher revenues and lower spending, with help from a booming economy. In his second term, he also negotiated a bipartisan budget deal with Republicans"[3] (Newt Gingrich/Bill Clinton did reduce government spending, instituted workfare instead of welfare, etc.).[4][5]
According to Investopedia, "Austerity measures are implemented to reduce government spending and shrink the budget deficit. Austerity policies include tax increases and government program cuts. Austerity measures may result in a decline in available social services and a reduced individual disposable income."[6]
The history of recent austerity measures, as will be shortly described below, shows that raising taxes and shrinking government debt through government cost-cutting, can help solve economic problems associated with excessive government debt, but how about reducing government spending and/or increasing economic growth? Does it work? Can it work better than raising taxes to eliminate government debt? Obviously, setting taxes too low can prevent governments from doing their vital/important functions, but setting taxes too high disincentives workers from earning wages so a balance is needed (See: Laffer Curve: History and Critique).
As far as cutting government spending, some say that it cannot or should not be done. This shows a lack of imagination and an ignorance of history and economics. If developing countries can successfully implement austerity budgets to pay down their debt, certainly a developed country like the USA can do so (Examples of developed countries having successful austerity measures: Austerity Measures in Crisis Countries – Results and Impact on Mid-term Development). For example, due to the Eurozone Crisis, austerity measures were successfully implemented in various European countries to help some countries remove some government debt. Measures taken by Euro leaders became very unpopular, but the crisis was dealt with in the end. Japan is now a pretty good place to invest because they paid off their debt and ended their balance sheet recession (Roaring Back From Pandemic, Japan’s Economy Grows at 6% Rate, August 2023). One of the greatest leaders of the 20th century was Margaret Thatcher who had the nickname of the "Iron lady". People frequently say that Margaret Thatcher's austerity and privatization policies (Privatization increased economic growth) were a "tough pill to swallow" but in the end her policies were very successful and turned the British economy around. As a result, Thatcher was the longest-serving Prime Minister in 20th-century British history.
Moses never told the Israelites to retire at age sixty-five.
Also, for thousands of years, mankind largely worked until they were unable to work. Moses told the Israelites to work six days (Not five) and in tougher economic times some people are going to have to work longer. In Proverbs 13:22, King Solomon wrote: “A good man leaves an inheritance to his children's children.” How are many more Americans going to do that if they retire at 65? The absurd and counterfactual notion that Americans need to retire at 65 is an absurd notion and many Americans now realize this and as a result are now retiring later. The age at which U.S. citizens can receive social security benefits should be raised for all able-bodied persons who are able to do so (Not caring for a sickly spouse who can't work). Also, the US Department of Education is a post Jimmy Carter institution and could easily be abolished so local governments have a bigger role. Big government in the USA can do some belt-tightening and to deny this fact is the height of economic ignorance, historical ignorance and foolish thinking.
Paring back social security benefits by increasing the retirement age would not only reduce its budget which is a big expense of the U.S. federal government, but it could potentially reduce Medicare cost. How? There would be less retired senior citizen coach potatoes increasing their health risk due to sedentary behavior.
I realize that things like austerity budgets and doctors telling fat people that they have to some dietary belt-tightening are things that can be unpopular, but the economic reality that excessive national government debt has caused problems in countries at various times in history necessitates corrective action.
Questions:
1. What about all the illegal immigrants that came into the USA via illegal immigration during the Biden Administration? Isn't this a big problem that will prevent the United States from solving its large federal debt problem?
2. Am I against the USA removing a lot of illegal aliens - especially ones who are not economically productive in the short and/or long term?
I am certainly not against deporting illegal immigrants who are economically unproductive or criminals and it can be done. Between 1953-1954 as many as 1.3 million people were deported during the Eisenhower Administration. What the next president does remains to be seen. Regardless, big government spending in the USA can and should be reduced.
Because it is unlikely that every single illegal immigrant is going to be eventually deported, what percentage of the illegal immigrants that crossed USA border recently and remain in the country are going to be economically unproductive? I don't know. Certainly not all of them as evidenced by the Trump Tower construction using illegal Polish immigrants. As in many things involving economics, there are winners, losers and tradeoffs when it comes to legal/illegal immigration. For example, a Harvard economist argued in 2016: "Here’s the problem with the current immigration debate: Neither side is revealing the whole picture. Trump might cite my work, but he overlooks my findings that the influx of immigrants can potentially be a net good for the nation, increasing the total wealth of the population. Clinton ignores the hard truth that not everyone benefits when immigrants arrive. For many Americans, the influx of immigrants hurts their prospects significantly."[7] I take the position of Trump on immigration which is that the USA immigration system needs to be reformed so the USA gets the very best immigrants, some illegal immigrants should be deported via tougher illegal immigrant laws enforcement and there should be a border wall across Mexico.
Contents
Graph of the U.S. national debt as a percentage of GDP as of March 9, 2024
Other essays on the United States
- The United States will be the leading power in the world for the foreseeable future
- Is the USA an economic powerhouse and juggernaut?
- The citizens of the United States are happier than the citizens of Russia and China. USA! USA! USA!
- The U.S. Navy is the most powerful navy in the world
- The USA will become bigger, better and stronger than ever before! Russia and China will not! USA! USA! USA! - Humor
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References
- ↑ Fast Facts about the U.S. Federal Debt, Cato Institute, 2023
- ↑ Did the U.S. Really Grow out of its World War II Debt?
- ↑ "A Harvard professor who helped Bill Clinton balance the budget in the 1990s says Kevin McCarthy will struggle to keep that promise, Fortune magazine, 2023
- ↑ Gingrich: Balance Budget by Cutting Taxes and Government, CNBC, 2011
- ↑ Clinton signs ‘Welfare to Work’ bill, Aug. 22, 1996, Politico, 2018
- ↑ What Are Austerity Measures?
- ↑ Yes, Immigration Hurts American Workers, Politico, 2016
