As the national debt continues to rise and exceeds $16.5 trillion, the interest paid by taxpayers is also going up. In 2012, taxpayers paid $220 billion in interest on the national debt. The U.S. has carried a debt throughout history so it may not seem important to many people.
Another term heard frequently on the news is gross domestic product. This value is calculated from several fiscal indicators: consumer spending, government spending, business spending and exports minus imports. The GDP is used as an economic indicator for many countries’ fiscal health throughout the world. This could also be viewed as a total cash flow. The larger the increase in the GDP each year the better everyone is (theoretically) living because they’re spending more money.
When too much money is going to local, state and federal governments, it lowers the standard of living for the taxpayer and reduces business investments, thus job growth. It appears that the different governments do not take into account when one of them goes up on tax or adds a fee; it does not affect the other government’s budget planning. In other words, the taxpayers have to pay all of them no matter how high they go. Yes fees are just another form of tax but can be explained easier when politicians say they never went up on a tax.
To spend money you must print it, have it in reserve, earn it or borrow it. This country’s GDP is currently around $16.2 trillion, dropping slightly in the last quarter of 2012. If we see deep spending cuts in the government, we could also see our GDP value drop. If our GDP drops significantly, could that also signal our debtors that we may be a higher risk and send the interest rate up on the national debt? Will the debtors continue loaning the U.S. money since our debt has crept over the 100 percent mark of the country’s GDP value? I don’t think I would.
Defense spending has recently come back into the 2013 talks due to the threats of war in the Middle East. Another federal tax increase (or loan) to the tune of $9 billion will be needed to balance the federal budget in 2013. This will keep us on track with spending as it has in the previous years. Assuming there is another federal tax increase, it could send our economy into a downward spiral resulting in less federal tax collection in 2013 and years afterward. Additional businesses could close or move out of the country to avoid the high tax.
To fix the obvious long-term fiscal problem is near impossible. Assuming the federal government never spent another penny, it would take about seven years to pay off the debt with the current tax amount being collected each year. Any 10-year plan proposed is never going to work in my opinion.
I am like most folks; I want to see a federal budget in a balanced approach, then I will believe it. The first step to a balanced approach is to stop the debt from increasing. That alone maybe too much to ask.