One of the biggest challenges for the U.S. going forward is the country's massive debt and deficit problem.
The U.S. government is currently spending about $1 trillion more every year that it takes in, and we've now piled up $16 trillion of debt. So far, this debt burden has been sustainable, but only because interest rates are at generational lows. If and when our creditors wake up and start demanding higher rates of interest, our ballooning debt-service costs will quickly swamp everything else in the budget.
Related: Who Owns America's Debt?
A mere glance at the federal budget reveals to any reasonable human being that we can't go on like this.
And yet, so far, our elected leaders have refused to do anything about it.
Instead, our elected leaders have formed themselves into two ideologically-driven camps that, like groups of children, refuse to compromise. The Republicans want to fix the debt by cutting spending. The Democrats want to fix the debt by raising taxes, especially on rich people. And, for some reason, our leaders seem to think it is okay to simply hunker down and stick fast. Never mind that, with every day that goes by, our debt burden grows larger.
The consensus of non-partisan economists (and reasonable people everywhere) is that the only way to solve our debt and deficit problem is to do it in a balanced way: To trim spending AND increase revenue. Currently, government spending is running at about 24% of GDP, and tax revenues are only coming in at about 17% of GDP. The only way to reasonably expect those lines to cross is to reduce spending and increase revenue, perhaps converging at about 20% of GDP. And if we don't agree on this soon and make the tough decisions necessary to gradually get there, our situation will only get worse.
The good news is, reasonable people everywhere will now have the help of some of the country's business leaders, who have formed a campaign to pressure Congress into coming up with a long-term deficit reduction plan.
According to the Wall Street Journal, about 80 CEOs have joined this group, which is dedicated to ending the deficit dysfunction in Washington. Politically, the CEOs hail from both sides of the aisle, but they're united in this common purpose.
"There is no possible way; you can do the arithmetic a million different ways" to avoid raising taxes, said Mark Bertolini, CEO of Aetna. "You can't tax your way to fix this problem, and you can't cut entitlements enough to fix this problem."
Jeffrey Immelt of General Electric (GE), J.P. Morgan's (JPM) James Dimon and Honeywell's (HON) CEO Dave Cote support this call for a balanced approached the deficit. But big oil executives, who fear higher taxes on their record profits, have not fallen into line on this push.
For the sake of the country, let's hope that support for this purpose only grows.
- Politics & Government
- Budget, Tax & Economy