I began this blog last November, right after the national elections, to promote my strong view that the United States is on a dangerous fiscal course, with an already enormous, and still rapidly growing, national debt. After four years in a row of deficit spending exceeding $1 trillion per year, the current year’s deficit is projected to be “only” $640 billion. Far too many people, including many of our national leaders, interpret this to mean that the problem is getting solved and so we can relax. But the already accumulated $12 trillion in public debt will cost our economy $600 billion a year, a significant fraction of total revenue, in interest alone when interest rates return to their historical average of 5%.
This is just the tip of the iceberg. Federal spending is out of control all across the board. Entitlement spending on Medicare and Medicaid is growing at twice the rate of inflation and is an especially acute problem. But progress here depends on figuring out how to get healthcare costs in general under control, a huge challenge. The much reviled sequester is working but it’s not nearly enough by itself to get discretionary spending under control.
Four years after the end of the Great Recession the economy is still limping along at 2% GDP growth and 7.6% unemployment. And this is after enormous fiscal stimulus (deficit spending) as well as quantitative easing by the Federal Reserve. Current policies are not working. What we need is broad based tax reform with lower marginal rates (offset by ending tax preferences) to stimulate business investment and the private risk taking which propels the economy and creates jobs. And, of course, faster economic growth will also increase tax revenue and therefore lower the deficit, as well as boosting employment.
This is a brief summary of what I’ve been saying for the past eight months. To me it just seems like simple common sense, but not everyone agrees! At any rate I’ll be out of town for the next two weeks. I hope to be able to make a few new posts while I’m gone. Stay tuned!
