National Debt
Most conversations revolving around the United States’ national debt and any plan to pay off the national debt are influenced too heavily by political considerations and do not take into effect enough economic or long-term thinking. While this is understandable, it is not productive for the United States reducing its debt burdening in an effective, responsible way. Too often conservatives boldly speak of paying down the national debt only made possible with truly draconian spending cuts, while liberals fail to give any significant attention to the United States’ ballooning national debt. I will make several general proposals that will constitute the basic framework for a plan to responsibility pay off the national debt of the United States within a reasonable time frame.
The United States should set a 50 or 100, year timeline for paying off its national debt. By taking 50 or more years the United States will be able to pay off our national debt in regular manageable installments that still give us the financial flexibility to invest in key areas of concern; education and infrastructure for example. If we were to set a 10-year time span, the payments the United States would have to make would be very large and require truly draconian cuts to public spending that would make any investment in education and infrastructure unfeasible. Liken a payment time frame to a home mortgage an individual may take out to purchase a house. That individual could pay off their house, a rather large sum of money for the vast majority of American citizens, in a ten-year time span, but the monthly payments would be oppressive for that individual. They would not be able to afford to pay for virtually any recreational activity, take a limited vacation, utilize furniture, or have any creature comforts. The bulk of their income would be dedicated towards making payments for their house. By spreading their mortgage out to 30 years, they are able to make payments on their house and to live a more comfortable life; taking vacations, going to the cinema, attending sporting events, eating a wider range of food, and so on. By creating a 50 or 100 year plan to pay off our national debt, the United States can make the payments necessary to pay off our national debt and still have the financial flexibility to pay for spending on education and infrastructure. The United States as an entity has a much longer time horizon than a single human life. So 100 years or more makes sense.
Adopting a logical, credible plan to pay down our national debt is all that is needed to restore what investor confidence the United States lost in political debt ceiling standoffs. The United States was downgraded from its AAA bond rating not for any financial inability to pay off our existing debt, but because of a perceived lack of political will to pass a workable solution to pay off our debt. While I have my concerns with the rational for the downgrade; mainly that rating agencies are taking an inherently objective problem, does the United States have the ability to pay its debt obligations, and applying a subjective lens, will the United States pay its debt obligation, it is undeniable that the United States has suffered a loss of credibility in the international world. Simple enacting a credible debt reduction plan will increase the credit rating of the United States. The United States has the ability to pay off our national debt; the only question is will the United States pay off our national debt. With the passage of a credible plan, the question is answered. The United States is not Argentina, who seemingly every decade threatens to defaults on their debt obligations and forces investors to take a haircut on their bonds. Argentina is a country that is not perceived to always honor their debt obligations. The United States is one of only four countries to never miss a debt payment, along with France, Canada, and Australia. The United States is well respected in the international community and the international community has full confidence the United States will meet its debt obligations. Again, the United States is not Argentina. If we submit a plan to reduce our national debt to reasonable levels, the international community will be satisfied.
I believe a concrete, rational 50 to 100 year plan to reduce the national debt of the United States will be a responsible way for the United States to reduce its national debt while still giving the United States the financial flexibility to invest in education and infrastructure. It will restore any lost confidence in the United States from an international financial market perspective. The United States would do well to adopt a logical plan under the general framework proposed in this essay to reduce its national debt.