While the federal budget deficit has decreased in the past few years, this decline follows an unprecedented increase in the deficit in prior years and remains high by historical standards. Today, public debt is more than 72 percent of our economy and is expected to rise, even with the economy poised to recover from the recent downturn. The Congressional Budget Office projects public debt will reach 78 percent of the economy by 2024. That is twice the historical average of 39 percent of the economy over the past 40 years.
Just 10 years from today, three-fourths of all federal spending will go to mandatory programs and interest on the debt. Higher federal debt translates into higher interest rates down the road and less capital available for small and mid-size businesses to borrow and invest. Families will then feel the effects of the rising debt as reduced investment can mean fewer jobs and lower wages, while higher interest rates will make home, automobile, credit cards and even college loans more expensive.
President Rutherford B. Hayes once stated, “Let every man, every corporation and especially let every village, town and city, every county and State, get out of debt and keep out of debt. It is the debtor that is ruined by hard times.”
Under current laws and operating practices, public debt will exceed the size of the economy by the late 2030s. If Congress continues to act irresponsibly and kick the can down the road, debt will reach even higher. As recently as 2007, debt was only 35 percent of the economy. The post-World War II average is about 40 percent. The growth in projected debt is due chiefly to the aging population and growing healthcare costs, resulting in increased Social Security and federal health spending. By 2045, 100 percent of federal revenue will go toward our major entitlement programs and interest on the debt.
There will be opportunities this year to reach agreements on deals that improve our fiscal situation. Those need to be approached with strong bipartisan support and a clear understanding of the importance of getting our fiscal house in order. We cannot and should not accept anything less than Congress making reduction of national debt a top priority. Additionally, President Obama needs to devote part of his final years as POTUS to reducing the burden of debt on this and future generations.
The Campaign to Fix the Debt is a non-partisan movement to put America on a better fiscal and economic path. More information about the movement can be found at www.fixthedebt.org.
President George Washington once cautioned about the importance of “avoiding likewise the accumulation of debt, not only by shunning occasions of expense, but by vigorous exertions in time of peace to discharge the debts which unavoidable wars have occasioned, not ungenerously throwing upon posterity the burden which we ourselves ought to bear.”
We need to be active in raising the issue, holding our elected officials accountable for failure to take action, and ensuring our candidates for office not only understand the importance of this debilitating issue but are willing to do something novel by going to work on solving our national debt.
Jeff Wasden is president of the Colorado Business Roundtable.
He can be reached at firstname.lastname@example.org.