Comprehensive Fiscal Policy Shift Needed
Guest column submitted by U.S. Senator Mike Crapo
An American child today inherits a larger public debt burden than at any time in American history. Our almost $15 trillion national debt puts a debt burden of nearly $50,000 per U.S. citizen. In the last 10 years, federal spending per householdhas risen by roughly $10,000 to more than $31,000.
If this trend is not corrected, federal spending will balloon to nearly $36,000 per household by 2021. We can correct this by comprehensively shifting our fiscal policy through aggressive federal spending cuts to reduce our deficit and debt and grow our economy.
Irresponsible federal spending compounded the problem. Federal spending, which averaged 20.4 percent of Gross Domestic Product (GDP) over the last 50 years, has grown to 24.5 percent.
Since 2007, when we were on track to balance the budget, Congress and the President have accelerated spending and borrowing to unsustainable levels. If left unchanged, federal spending will continue to rise to increasingly dangerous levels, and federal spending is projected to increase faster than revenues.
The government already borrows 42 cents for every dollar it spends this year. This unsustainable spending ballooned our national debt to almost 69 percent of GDP, up from 40.3 percent in 2008. If we continue on our current path, Congressional Budget Office projections show public debt growing to 100 percent of GDP in 2021. However, budget conventions mask part of the government's liabilities. Gross debt, which includes the government's borrowing from those to whom it owes future commitments, is much higher. In 2011, our nation's gross debt is estimated to be 99.8 percent of GDP. This means that we have obligations equal to the entire economic output of our country, and foreign creditors currently own more than half of our public debt.
Debt this extreme drags our economy further down, increasing interest rates, slowing economic growth, hindering job expansion and discouraging private investments. Higher debt levels will require higher interest payments on that debt, which eventually require either higher taxes or a reduction in government benefits and services. By 2025, current revenue estimates will only cover interest payments, Medicare, Medicaid and Social Security. Every other federal government activity-from national defense and homeland security to transportation and energy development-will be paid for with borrowed money. Tax increases and higher interest costs worsen the problem, weighing down small businesses and entrepreneurs that drive economic growth. Fixing this requires creating a business environment that enables American job creators to compete successfully.
Our fiscal challenges are serious and real. Action cannot be postponed, and the costs of doing it later only increase. That is why I worked with a group of Senators to construct a comprehensive fiscal reform plan to tackle the deficit, reduce federal spending and provide the economic growth needed to get our nation back on track. The plan would fundamentally overhaul our tax code with a pro-growth formula that dramatically cuts taxes. Not only would it make significant cuts to all individual tax rates, but it would also lower the corporate tax rate from 35% to as low as 23%, ending the U.S. reign as having the world's second highest business tax consequently making American business more competitive on the world market. It would dramatically reduce discretionary spending and enact entitlement reform to control the explosive growth of spending and strengthen the solvency of Social Security. Finally, it would institute strict enforcement tools to tighten the government's budget processes. Though this combination of provisions, spending would be reduced by nearly $4 trillion over 10 years and the substantially reformed tax code would promote economic growth and job creation here at home.
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