When confronted in the final presidential debate with the assertion that each of their plans would increase the national debt, the candidates denied it by saying either economic growth or higher taxes would offset this increase.
But deficit spending and unsustainable debt pose a significant threat to our economy. The House Budget Committee recognizes this threat, recently releasing a working paper highlighting the damaging economic effects of the national debt. The results are scary.
As the government runs increasing budget deficits, it must borrow more money to fund current commitments, such as entitlements, and make interest payments on the debt. This makes interest rates a larger share of the federal budget and in turn increases borrowing by the government.
Academic research shows that high national debt is associated with less economic output and less prosperity for individuals and families.
The Congressional Budget Office’s projections reflect this. Compared to a future where the government adopted reforms that stabilized debt at the current level of 75 percent of gross domestic product, the current path of growing spending and debt results in an annual income loss of about $12,000 for the average family by 2046.
We already are seeing the debt, approaching $20 trillion, drag down the economy. The recovery from the 2009 recession is the weakest in the modern era. Over the past five years, real GDP growth has averaged slightly more than 2 percent, below the historical average of 3 percent.
Even though the unemployment rate of 5 percent seems to indicate a healthy economy, a closer look at the numbers shows a different picture.
According to the House Budget Committee report, the number of individuals working part time due to poor economic conditions since the recession has jumped by 42 percent, and about 14 million Americans have left the labor force since early 2009.
Congress and the new president must begin to take our deficit spending and growing debt seriously.
Lawmakers should not raise taxes to try to solve the government’s fiscal problems. Our debt and deficits are the result of a spending problem, not a revenue problem.
Paul Winfree, director of the Thomas A. Roe Institute for Economic Policy Studies at The Heritage Foundation, writes that “revenue growth cannot keep up with spending if spending increases at a rate faster than the economy is growing in the long run.”
This is exactly the scenario we’re witnessing, given current projections.
Raising taxes would weaken the economy further and worsen the fiscal trajectory. The United States already has the highest corporate tax rate in the industrialized world; raising taxes higher would discourage investment and job creation.
Instead, lawmakers should focus on reforming the drivers of our national debt: entitlements. Medicare, Medicaid, other health care programs, and Social Security together made up 52 percent of the budget in 2015.
America needs presidential leadership to control spending and debt and return to a balanced budget.