How you can help the country gain control over our public debt.
I will continue to write about the importance of reducing our debt-to-GDP ratio over the next several months, shifting my emphasis from explaining the importance of the issue to offering policy proposals of my own for fixing our federal finances. I will focus on both tax and spending reform, and some of my suggestions may surprise you. Stay tuned.
In the interim, I encourage you to get smart and get involved. There is plenty that can be done today to start reducing our dangerous dependence on debt.
Take the Public Debt Pop Quiz if you haven’t done so already. You may be surprised by what you learn.
Take a few minutes to learn more about the amount of our public debt, the costs associated with servicing this debt, and the downsides of issuing so much debt:
- Substantial public debt reduces economic growth. http://www.heritage.org/research/reports/2013/02/how-a-high-national-debt-impacts-the-economy
- Higher debt can lead to higher interest rates, with dangerous consequences. http://www.cfr.org/financial-crises/dangerous-us-government-debt/p22408
- Debt constrains policy choices and leaves the U.S vulnerable to future economic downturns. https://www.cbo.gov/publication/45555
- The costs of servicing the debt are substantial (and crowd out other more valuable spending). http://www.treasurydirect.gov/govt/reports/ir/ir_expense.htm
- U.S. debt has exploded over the past several decades. http://www.treasurydirect.gov/govt/reports/pd/histdebt/histdebt.htm
Even if you scored well on the Public Debt Pop Quiz, take this companion quiz to expand your knowledge of the downsides of debt after reviewing the materials referenced above:
- Since the end of the Great Recession, the U.S. annual GDP growth rate has been approximately:
- The Great Recession hasn’t ended. This is a trick question.
- Slow economic growth (e.g., approximately 2% per year) can:
- Lead to higher than average unemployment
- Put downward pressure on wages
- Lead to reduced consumption
- All of the above
- None of the above. Slower growth is still growth.
- The number of years it took the U.S. to accrue $1 trillion in debt:
- The number of years it took the U.S. to go from $1 trillion to $18 trillion in debt:
- Today, the average interest rate on U.S. debt is approximately:
- 0%. Investors are happy to avoid losses and thus we don’t have to pay interest.
- None of the above. Only a fool would buy U.S. debt and therefore we have to pay much higher interest rates.
- True or false: The average interest rate on U.S. debt today is approximately 1/3 of the average interest rate in August 2001.
- True or false: If we carry too much debt, we are economically vulnerable to changes in foreign investor behavior.
- True or false: China is the largest foreign holder of U.S. debt.
- True or false: Dedicated payroll and capital gains taxes cover the entire cost of Medicare today.
- True or false: Dedicated payroll taxes cover the entire cost of Social Security today.
If you are ready to make a difference, I encourage you to get involved with one or more of the following organizations, each of which is focused on non-partisan solutions to growing our economy, reducing our deficits, and restoring our debt-to-GDP ratio to a sustainable level:
Bipartisan Policy Center:
Fix the Debt:
And keep visiting www.2040matters.com. I’ll have more to say soon.