It is well documented that U.S. federal government spending is on an unsustainable course. The total U.S. federal debt currently stands at $14.2 trillion dollars and is rising at a rate of $3.8 billion each day. The extreme debt load threatens higher taxes and interest rates in the future.
The United States can borrow at relatively low interest rates today but, as the debt continues to increase this is unlikely to continue to be the case. Lending rates on everything from mortgages to credit cards are tied to the rate on U.S. Treasuries, the cost of borrowing will rise for businesses and their customers.
Few problems are more difficult, and seemingly more intractable, than restraining government spending. Repeated attempts to face the problem over the last few years have ended in failure and bickering. It is apparent that sacrifices will have to be made by everyone. Without a plan to get government finances under control the U.S. will be spending $1 trillion a year on interest alone by 2020. The sooner we make a real attempt to address the looming debt crisis the better.
SOLUTIONS
Commit to Limit the National Debt to 60% of GDP
While it’s not possible to eliminate the debt entirely anytime soon, we should set a goal of limiting the national debt as a percentage of the overall economy. A debt level set at 60% of Gross Domestic Product (GDP) will put the U.S. in line with international standards and create the best environment for economic growth.
Eliminate or Consolidate Federal Programs
Once a federal program is put in place, it almost never gets eliminated. Further, various agencies have institutional prerogatives to maintain functions and programs that are duplicated elsewhere in the government. Another aspect of the problem is that many of these programs are created by statute and can only be consolidated by legislation. Congress should give the President broad power to consolidate duplicative federal programs. Further, common back-office infrastructures such as payroll management should be streamlined across the government.
Make Meaningful Reductions in Entitlement Programs
Far and away the largest driver of long-term debt will be entitlement programs such as Social Security and Medicare. Hard decisions must be made that will include limiting benefits of those with higher incomes and raising the age of eligibility for certain programs.
Enact Enforceable Pay-As-You Budget Rules
Require spending limits that actually have teeth. If legislation exceeds these targets, give the President authority to unilaterally cut spending to maintain the targets.