With our National Debt surpassing $34 Trillion Dollars and the current Debt Ceiling crisis again needing to be resolved, Congress may have a temporary budget proposal in the works of 1.59 trillion dollars comprised of 886 billion designated for defense spending and another 704 billion in non-defense spending.
But our main problem is our rising national debt just passing the $34 trillion dollar mark with no end in sight considering our rising expenditures for social security and health care costs (Medicare), defense spending and now rising costs for the servicing of our National Debt due to higher Treasury bond yields needing to be paid out as our rising budgetary costs cannot nearly alone be financed by our annual federal (income) tax revenue.
And if China’s economy surpasses us, we could very well see the dollar replaced by the Chinese Yuan as the world’s currency—This IS the big problem and the worst of the worst that could happen to the United States!!
So why can’t we just balance the budget? Clinton did it in the late 90’s from 1998 to 2001! But how did our Debt then get up to where it is now–$34 trillion.
Here’s the rundown—George W. Bush ran our national debt up to $10 Trillion with the war in Iraq and with the Bush Tax Cuts. Then when Obama left office, we had climbed to 19.5 trillion and when Trump exited, Trump had added another $8 trillion cutting corporate taxes from 35% to 21% asserting his corporate tax cut would increase our GNP with no loss in tax revenue.
And with the Pandemic and all the stimulus checks sent out to individuals, families and businesses under the American Rescue Plan and with Biden’s FDR-like Infrastructure Investment and Jobs Act and the Chips and Science Act needed to rebuild our infrastructure, prevent further supply chain issues, ensure U.S. leadership in technology, putting people back to work and reviving our economy, this has caused our national debt to increase from $27.5 Trillion ($19.5 + $8 Trillion) when Trump left office to $34 Trillion.
So how do we address our rising national debt?
First, when Biden’s Infrastructure Investment and Jobs Act and the Chips and Science Act “kick-in”, these programs will begin to pay for themselves. Also, when the Trump Corporate Tax Cuts and Jobs Act (TCJA) expire in December 2025 and revert to pre-TCJA levels (going from its now 21% back to 35%) unless extended, this will produce further tax revenue. Or to only increase it from 21% to 28% or 25% would also help and raising the tax on those making $400,000 or more as Biden proposed and hiring IRS agents to do additional audits would also increase tax revenue.
Other solutions to our National Debt specifically Social Security would be since wages especially on the lower end of the wage scale have doubled and, in some cases, even nearly tripled, this would increase social security retirement paycheck tax deductions. Possibly slightly increasing the social security tax itself would also help as employers already match employee contribution-deductions. Also allowing the government to invest in the stock market, say index funds and other minimum risk investments would be a way for the government to generate revenue and decrease the National Debt.
Basically, there’s 3 parts to any economy—the working class, government and business. More specifically on business—businesses of any size to corporations and the investment community all the way up to and including Wall Street.
Now for an economy to best work there must be a balance between what the working class needs and what the government needs to adequately protect its citizenry against any threats foreign and domestic including natural disasters and disease. And now, clean green energy with protection against climate change. Also, the business-corporate-investment community needs to grow, compete internationally and fairly provide for its workers and investors for the capital it needs to grow and compete.
The problem in a nutshell is that there’s simply not enough capital or wealth to go around to cover all the needs and reasonable wants of all parties involved.
For the worker, the ability to buy and own one’s home, a college education for their children. For business, corporations and the investment community to make and have adequate capital for growth and expansion, equipment purchases, necessary research & development, to competitively pay their workers and provide for periodic raises and to provide and pay their investors an adequate return and dividend to maintain an active continued interest from the investment community.
Basically, managing a nation and society has become too complex with all the potential problems involved—the possibility of nuclear war, disease outbreaks and now conflicts in Ukraine and Gaza. It simply costs more to adequately protect a society despite rises in a nation’s GNP. Possibly with AI (Artificial Intelligence) productivity will increase to solve these problems and thus reduce our nation’s financial deficit.
Unfortunately (or fortunately) other industrialized nations have these same problems. For example, currently our debt-to-GNP ratio is 129% but the average for G7 industrialized nations is at 128%. China is at 77%. That’s the problem. We must continue to develop and keep up international trade as much as possible so that other nations continue to deal and depend upon the dollar’s stability and value. As long as we can do that, the dollar will continue to be the Global Currency.