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Columns

Reynolds ’17: Debt and destruction

By
Staff Columnist
Monday, April 11, 2016

From border walls to military intervention to free college tuition, many ambitious policy plans come from the current presidential nominees. This comes with much ideological debate about whether or not these things are “right.” But I do not particularly care about whether or not these ideas are righteous and moral. Before that discussion, there needs to be one about feasibility and practicality because right now is not the right time for any of these big ideas.

It is not the right time because of the much-discussed but never solved problem of American debt. For those who do not know, we owe more than $19 trillion, which is clearly a lot of money. This number, though, probably does not matter that much. The United States will never actually pay off this full amount. But we will have to make interest payments. And these are the payments that worry me.

To begin in 2013, we paid interest at about 2.43 percent (very, very low). If you apply this number by our nearly $20 trillion principle, you get a result that is a bit less than $486 billion in taxes paid yearly on nothing but interest. No matter where citizens fall on the political spectrum, they should not endorse this spending habit. At least one Forbes columnist projects interest payments to increase to “3.5 percent (of the United States’ gross domestic product) in 2020, 4.5 percent in 2030 and 10 percent in 2050. At that point half of all federal taxes will be going just to pay interest on the debt.” To be clear, this is a projection, and we may never reach that point. But the projection is from 2010, and the same columnist predicted debt as a percentage of GDP to reach 77 percent by 2020. We have already exceeded that today — the debt has reached over 100 percent of GDP, so it seems more likely to be a conservative projection.

If we reach that 50 percent threshold — or anywhere remotely close to it — we will have a serious problem. I can only see three solutions to it at that point: huge tax raises, huge spending cuts or defaulting on the debt.

The uncertainty involved in a default like this (and the desire of so many politicians to avoid one) makes the first two solutions much more likely. Given how severe these changes could be, we need to discuss this now. The simplest solution is to avoid spending expansion, make spending cuts and raise taxes right now on much smaller scales than future crises could demand. Hopefully this would lower the principle (and therefore our interest payments), reduce the debt-to-GDP ratio and increase the reliability of our tax base to fund payments. I strongly urge readers to consider this when contemplating the ramifications of potential presidential policies.

Take U.S. Sen. Ted Cruz, R-TX, who has been a fairly vocal supporter of a large military. If you are a fan of this line of thinking (I am generally not), please remember that it costs a lot of money. (Military spending accounts for more than half of discretionary spending.) Further, while the idea of leaving the country vulnerable may be scary, a country is indisputably more vulnerable to both foreign and domestic threats in times of economic distress. If you are a fan of presidential plans for military strength, you should consider the potential increase in vulnerability you may create for our future.

On the other end of the political spectrum, we have U.S. Sen. Bernie Sanders, D-VT. If you are a fan of his planned expansion of entitlement programs (I am generally not), remember that this also comes with astronomical costs. And while there has been much discussion that his proposed tax plan would cover every dollar of these costs, I am dubious of these claims. According to the aforementioned Forbes columnist, taxes would likely have to increase by about one-third just to cover the Treasury Department’s projected costs to fund Social Security and Medicare benefits that have already been promised. In short, it will likely be difficult to keep entitlement programs as large as they currently are, let alone expand them. And make no mistake about it: Entitlement programs will be the first things to go if cuts are needed. The military is going nowhere, and basic programs like fire and sanitation departments will get priority. If you believe that working-class Americans do not receive the help they need today, you should consider how much worse off they will be if Social Security, Medicaid, Medicare and other programs are cut.

I get it: This sucks. A strong military, social safety nets and low taxes all sound really, really nice in theory. Everyone enjoys the ideas of feeling safe and secure and having more money to spend. Duh.

But if the idea of stopping the growth of programs or raising taxes upsets you, remember that things can get a lot worse. The possibility of half of every dollar you give to Uncle Sam going to interest payments sounds really, really shitty in theory. Duh.

So we should instead focus on smart solutions to our greatest challenges rather than throwing money at them. Instead of expanding the military, we should make sure that its decisions are not creating more enemies than it defeats. Instead of expanding the size of domestic programs, we should focus on increasing their efficiency. In short, we should remember that there are variables that determine the success of government programs other than money. These are the ones that deserve the majority of our focus.

George Reynolds ’17 can be reached at george_reynolds@brown.edu. Please send responses to this opinion to letters@browndailyherald.com and other op-eds to opinions@browndailyherald.com.

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  1. Man with Axe says:

    The crux of the matter is entitlements.

    The military is already at its lowest levels of troops, ships, and planes in many decades, and we no longer have confidence that we can fight two wars at the same time, which has always been an important marker of readiness. That’s because if we are overly extended fighting enemy A and enemy B knows we can’t fight two at once, we are helpless to check their adventurism.

    Entitlements are the great bulk of the budget, and they are growing when they should be shrinking. In fact, our unfunded liabilities for entitlements added onto the existing debt total something like $70 trillion, and that doesn’t include state liabilities for public worker pensions. So this must be the focus of our cutting. It’s going to be painful, but not as painful as losing thousands of troops in war because we don’t have adequate manpower for force protection or the most advanced weaponry that we could have.

    Just as a recent example: We used to always have a fleet in the Mediterranean, but there was no fleet there during the Benghazi attacks.

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