Published March 15, 2013
We continue to hear that the United States’ ever-rising debt is a ticking time-bomb and that one day in the near future it will explode. We also hear that we are robbing from future generations. Although both of these are true, they speak to the future, not to present day. Right now, as you read this article, the national debt is directly harming Americans, and the government isn't being honest about it.
The government spends more money than it takes in. In fact, it spends $1 trillion more than it takes in every year. Since it doesn’t collect enough in taxes to pay for everything, it borrows money (debt) from other countries to fill that gap. That debt costs even more money in the form of interest payments. Currently, we must pay $500 billion in interest every year.
That money has to come from somewhere, so we literally need to print money out of "thin air." When you mass-produce anything, its value drops. So if we buy anything outside of our borders, our money will have less value (relative to the currency of another country) for us having printed more of it. Since our money has less and less value, that makes any items we buy outside our borders more and more expensive.
And guess what? We purchase 70% of what we consume from outside our borders – such as food, oil, and countless other commodities that are in the products we use every day.
Right now, food and energy prices (as well as other products) are rising very quickly because we are printing an unprecedented amount of money, weakening the dollar. The rise in oil prices is particularly troubling because oil is used in every aspect of our economy. The weaker the dollar, the more expensive oil becomes. As oil gets more expensive, any item that has even a fraction of production impacted by oil prices will also rise in price.
These increased costs are passed along to the American people, so we all have less spending money in our pockets. Middle-class Americans feel it the most, because they spend a greater portion of their income on basics like food and energy. The more they must spend on those basics, the less they can spend on other things, which means the businesses that produce those other things make less money. Since all these business make up the economy, the economy slows down. As the economy slows down, fewer people get hired, and job growth slows. As job growth slows, unemployment rises, which means fewer people have money to spend, and the vicious cycle continues.
Balancing our budget isn't just for our children. It is for us . This debt is draining our economy of a half a trillion per year in interest alone and that number will increase each year if we don't balance our budget. For our country to create capital, we must borrow. The more we borrow, the more we devalue our currency.
Simply put , the more we devalue our currency by borrowing, the more the same basket of goods cost to you the American citizen. As a result, this is massively inflationary, causing prices to rise. Many correctly say that a cheaper (devalued) dollar will help us export many more widgets that we make in our country. However, this is only true for a very short period of time. Soon the devalued dollar will cause prices to increase. This is already occurring and this is why prices are rising on the majority of items you spend money on everyday.
This devaluation of our currency actually has worldwide negative implications. We are now seeing other countries/regions devaluing their own currencies (Japan, Europeans, Venezuela) by borrowing and monetizing. The end result is worldwide inflation. Some will argue that the inflection point for this is the United States and its failed policies.
Other negative result that are occurring today from this problem of printing too much money. Wages are stagnant, as employers don’t have any reason to pay more for workers because demand for their product has fallen. With more and more people out of work, they turn to food stamps, and there is greater dependence on entitlement programs.
As you can see, the devastating effects on the economy aren't something to worry about in the future. We feel it today, in every aspect of our lives, and it’s getting worse. The future is here, right now. It is time for all Americans to wake up and understand that their lifestyles are under attack every minute of every day, and there is a specific reason for it: debt and spending.
What’s the solution to our debt troubles? Reduce tax rates. This puts more money into people’s hands, which they will spend to stimulate the economy. Folks in the upper-classes will have more money to spend as well, further driving economic growth.