Fixing Our National Debt - Essay Sample

Introduction

Countries finances are sourced in various ways. From income taxes to capital gain taxes, grants by multilateral and bilateral development partners and institutions and also internal and external borrowing. The two latter methods are common among nations hence not limited to the US. Lending leads to national debts which must be within the radar of experts to ensure they do not cross the red lines. While public debts may be measured in various ways, the US debt, in this case, will be measured relative to the aggregate Gross Domestic Product. This will highlight both historical and current figures with a view for comparative analysis on the individual budgetary allocations which can be well prioritized to address the issue of rising public debt.

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The US national debt has in recent years risen to alarming levels. Figures point to a dire economic situation where the aggregated national debt is 77% of the Gross Domestic Product (GDP), a statistic that is average as twice high as it has been for the previous 50 years. Experts have expressed their reservations that by 2031 the figure could surpass the economy size while 2034 could see the record of 106% to the GDP being broken. This calls for a multi-sectoral approach in addressing the annual deficits which occasion the government spending hence the astronomical figures. To ensure reasonable national debt that will give the US economy a breathing space, the following measures ought to be put in place.

Generally, the US government budgetary estimates can be spread across sectors that include but not limited to Defense, Education, Infrastructure and Research, Social Security, Health Care, Individual Income Tax, Other Domestic Spending and taxes. A relook and re-prioritization of these budgetary elements and tools could either see an increase or decrease in the national debt. Nonetheless, in as much as the debt economic outlook might be rosy here are the five things that the government should never reduce their budgetary allocations owing to sensitivity to the economy.

Defense being one of the major departments in the US receives a significant portion of the budgetary allocation. Its sub-elements are many; however, the government should never estimate budgetary cuts to allow veterans to see any doctor outside the Veterans Administration (VA). This is because as the Veterans Access, Choice and Accountability Act of 2024 sought to address, such a move would leave veterans in a situation where timely medical care would only be a mirage.

The government should also never think of cutting down the payroll tax. The US citizens' social security is significantly sourced from the payroll tax as split in equal proportions between the employer and the employee. An increase in Payroll tax by 1% would see a sharp decline of 8% of national debt vis a vis the GDP. The Government should also not replace Obamacare with American Health. For any productive economy, the health of its workforce is of great importance. Although replacing Obamacare with Trump's 2017 proposal, American Health Care Act (AHCA) would increase the cost by $200B by 2029 and reduce the debt to GDP ratio to 2% in 2050 insurers could have taken the advantage of the law and charged older people close to five times than younger people as the law is among other things based on age-adjusted tax brackets. This law could also potentially draw a population of about 23 million people out of medical insurance in ten years.

In domestic spending, the government should not eliminate the community development and community service grants. Estimated at around $3B per year community grants are a form of an economic stimulus program that is channeled towards lower income people.

Government authorities should also restrict themselves from raising the capital gains tax and dividends tax to the proposed 28% ('Fix the National Debt'). This has a net negative effect given the fact that potential investors will leave the US market and look for tax havens to invest their capital. This would leave the economy in bad taste as the dollar will devalue due to spiraling down the surge in demand.

Given the skyrocketing debt/GDP, the US government must, however, go back to the drawing board and consider budget cuts on the following items. First, the Government should end its war mission in Iraq and Afghanistan. It is estimated that currently, the war takes a significant portion of about $7B per year. Geiling et al. argue that by 2035 when most of the veterans will be middle-aged, there will be costly health issues akin to Vietnamese veterans. The acute issues will include among other things the Post-traumatic stress disorder which will lead to expensive medical consequences further straining the budget (1236)

The US government must also cut its budget estimates as regards the costly US navy fleet. Experts have expressed reservation about the heavy investments that the government continue to channel towards the purchase of heavy naval ships. Though a significant boost towards securing the maritime borders, Crary, et al. (683), question the economic viability and sustainability of such investments. They argue that the sizing of such investments is imminent as there is a potential threat in some areas where the money continue to be poured. If such redundant expenditures are chopped off the budgetary estimates probably our national debt could come down to manageable levels.

The government should also consider scrapping out though with moderation, the student loan subsidies. This should be replaced with well-structured income-oriented repayment for students. Such an arrangement would save the government the burden of covering every university and college student fees while letting them engage in gainful employment which would further broaden the tax base. According to Zahorsky and Henderson, the 2010 Student Aid and Fiscal Responsibility Act brought to an end of the federally guaranteed student loans and instead replaced them with direct loans from the Education Department (33). This converted the loan guarantees into income-producing assets hence an estimated reduction in federal budgets by close to $61B spread in 10 years.

The US government must also act speedily come with structured engagements and policies towards ensuring a modern Medicare that is premised on cost-sharing. The partnership between private and government-run hospitals will be great importance in a bid to saving the public costs channeled towards medical care of both the young and old individuals. Individuals will be encouraged to be at the centre of policy where a centrally managed finance pool will be channeled towards footing their hospital bills. The government will play a regulatory role, which is less costly as compared to the billing system which puts the government at the centre of bill payment.

The government should also tighten its belt and ensure an effective rate of the carbon tax and the partial rebate tax. Greenhouse carbon within and other countries are detrimental to the US citizens' health. This has resulted in heavy government expenditures towards the health sector. To fund such a sector, both the national and federal governments having been forced to turn into debts to sustain the bills. According to Metcalf increased energy prices as a result of a carbon tax will certainly contribute to increased efficiency investments (11). Such investments will lower carbon emissions which automatically translates into reduced expenditures in curbing carbon-related environmental and health issues

Upon going through the choices dichotomy as provided at ("Debtfixer"), there are budgetary allocation surprises that not only surprising given the fact that the debt/GDP ratio is on an upward trend. For instance, the significant portion of the Defense budget point to huge expenditures which probably explain while the debt figures are rising towards historical figures. According to ("Debtfixer"), if the US decided to end the continuing wars in Iraq and Afghanistan the total war expenditure would come down by a whopping $ 440B by 2029. It is a surprise why the government has not thought of strategic withdrawal of its forces from those territories.

Another interesting aspect of the US defense budget that probably explains a rise in public debt is the huge expenditures on navy ships which should be reduced to cut down the cost of running, operating, maintaining and perhaps repairing the old ones. Though experts argue that close to $110B could be saved by reducing the fleet from 292 to 230, it is surprising that the government and the defense department have not acted on the advice. Contrary to popular belief, it is also surprising that increasing the working population retirement age would translate to savings of about $60B. Although such a decision would result into the ageing population and limit opportunities for the younger population out of college to enter into gainful employment estimates point to a situation where such a policy could lead to significant aggregate national savings hence reducing the government's appetite for borrowing in future.

Raising of the payroll tax is another contentious issue that will likely lower the purchasing power of the population amid fears of a rising cost of inflation. However, according to information on 'Fix the National Debt' raising the payroll tax by 1% would result in $440B savings in ten years. This is one of the ways to go if we have to manage our national debt. However, on the hand, the general population is likely to feel the heat of dwindling purchasing power. It is also interesting how the reduction on environmental spending could lead to savings amounting to $40B within a decade. Surprisingly, the government has been spending huge amounts towards the promotion of environmental cleanliness and reduced carbon levels. The detrimental effect of dirty environment, nonetheless, leaves the authorities with delicate balancing between cutting on environmental spending and the promotion of a safe and clean environment. Perhaps, this is where the introduction of the carbon tax should be invoked.

In the dichotomy of choices provided, some of the choices made were hard to come by. Putting yourself in the shoes of budgeting bureaucrats, it is hard to make some decisions, but in the interest of the larger economy, such decisions must be made. The most challenging choices between the initial and final decisions include the following.

On social security, it is was a bit hard to make the final decision on raising the payroll tax cap to cover at least 90% of the earnings. Though this could boost the tax man's collection and reduce the public debt through increased income streams, on the other hand, it would be a discouragement to hardworking individuals who would rather stay home rather than work overtime while their dues are subjected to a payroll tax.

On the defence budget, it is also hard though necessary to decide on buttressing our border walls. By constructing a border wall, we would deal with the issue of illegal immigrants. However, the perception of politics and the general view of the US as a friendly state and a land of opportunities would dwindle. Though savings could be realized, to some extent the tax income generated from the working immigrants would shrink further complicating the public debt equation.

Although increasing the corporate tax to 25% will save the economy billions of money, this is quite a challenging choice. Some of the American tech giants are registered elsewhere owing to our high corporate tax. Though comparatively low compared to other first world economies, tax havens have lower tax rates which drive such companies to migrating their registration details. To close in on such firms, state laws should compel such local companies registered elsewhere to cede part of their proceeds when repa...