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Debt Crisis

Kerby Andersonnever miss viewpoints

Members of Congress are debating fiscal issues, but unfortunately they often are debating the wrong issues. On the table are two issues: the debt limit debate and the tax reform debate. As important as they are, they pale in comparison to a bigger issue.

Justin Bogie and Chase Flowers say, “America is Heading Straight into Its Most Avoidable Crisis Ever.” In fact, they compare it to the familiar story of the sinking of the Titanic. The crew of the Titanic chose to ignore warnings of icebergs. Congress can fall into the same trap instead of avoiding a crisis that is preventable.

Already the federal debt has reached $20 trillion and is growing at an unsustainable rate. According to the long-term projections of the Congressional Budget Office, “the federal debt is projected to increase from $20 trillion to $92 trillion in the next 30 years.” The only areas of spending that are expected to increase as a percentage of GDP are Social Security, major health care programs, and interest on the debt. These are the three areas that will be driving the national debt.

What will be the impact? First, interest rates could rise sharply because creditors want more protection or because the government is attempting to sell more bonds than people are willing to buy at current rates. Second, these higher rates will mean that the cost of the federal debt will be greater. This will force the government to either tax more or borrow more. Third, this increased federal debt will restrict the government’s ability to use tax and spend policies to respond to a financial crisis or even an economic downturn.

Of course the younger generations in America are the ones who will bear the brunt of these dire economic trends. Unless members of Congress reduce spending and reign in entitlements, higher taxes and lower wages are what await these younger members of society in the future.

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Debt Crisis

 
 
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