Last year, if every dollar made in the United States was used to pay off the Federal debt, that amount would fall over a trillion dollars short. The debt has been presented as an unsolvable fixture of our country, hitting 103% of the GDP for the first time in our history. Both Republicans and Democrats alike have been paralyzed when it comes to finding a solution to the problem, with ideological differences compounding the issue.
Disagreements regarding the debt have polarized the political spectrum. Neither side is willing to concede their proposed solution. The debt has been discussed in nearly every major congressional debate in the last year. Watching the news, you’re made to believe that it’s both the first time the country has faced a crisis of this kind and that it’s ultimately unfixable.
Neither of those points are true. Our country has faced crises as great as this one before and we have survived. We can get rid of our debt as we have done before.
Bill Clinton faced a national debt of 4.5 trillion dollars (68.1% of GDP at the time) when he became the president in 1993. In the previous year, the budget deficit was 290 billion dollars. By the end of Clinton’s presidency, he lowered that debt to only 57% of GDP and the United States had a budget surplus for the first time since 1969.
The 1993 debt crisis was solved through ambitious bills that helped lower the debt and increased funding through several methods including raising taxes of the top 1%, creating a 35% income tax rate for corporations, raising or eliminating the cap on Medicare and Social Security taxes, and expanding the Earned Income Tax Credit. These methods were combined with spending increases in several areas including education and research.
The debt our country faced in 1993 grew out of the Cold War and and the arms race with the Soviet Union. The same focus on massive military spending drove the USSR to bankruptcy. The debt crisis of 1993 was, fundamentally, no more difficult to tackle than the crisis we face today.
Now, we no longer contend with the USSR but instead contend with ballooning entitlement payments rooted in promises our government made but can’t keep. Entitlement payments to the elderly have grown to nearly 70% of federal spending or roughly 2.4 trillion dollars last year. This spending has dwarfed government investments, which have declined to a mere 15% of federal spending. Investments include spending in education, infrastructure, and R&D, which in the past have been higher than spending on entitlements. Over time, they have diverged at roughly the same rate, with investments declining and entitlements increasing.
The idea of entitlements is not necessarily bad. Most entitlements pay back contributions or promises made decades earlier. They are designed to help during retirement and to reduce poverty. Entitlement programs have been remarkably effective at this, reducing the poverty rate of the elderly to less than 10%. However, this reduction in poverty has not carried over to other demographics. Poverty among children was at 22% in 2011. Just because these entitlements have helped seniors doesn’t mean that all age groups are benefiting, nor that these entitlements have widespread, positive effects on our entire country.
The real price of our ballooning payments is the future opportunities it is putting at risk. The American Society of Civil Engineers gave the United States infrastructure a grade of D+ in 2013. Federal infrastructure investments as a percentage of GDP have fallen in a trend that looks primed to continue occurring. This lack of investments will cost our economy an estimated 3 trillion dollars between 2012 and 2020. The infrastructure our economy has relied upon for the past 50 years is aging. Neglecting it in order to pay off other commitments is a mistake that we will pay for in the future.
While we are facing an internal issue, it is one as consuming as any our country has faced before. We can see a widening ideological gap between Republicans and Democrats as the debt polarizes the country. It’s easier to be blamed for messing up than it is to gain support for trying. For this reason, few politicians are willing to take definitive action. However, this is not a problem we can ignore. The repercussions for not acting and the price of the solution will only grow over time. We must act. This issue is larger than any of us and it will take all of us to solve.