The general problem: Our government spends more than it takes in. This year alone we are projected to spend $1 trillion more then we brought in. Over recent decades, we have built up a total debt of more than $16 trillion. These numbers are huge, and it’s hard to understand how this affects your life today and in the future. Here are some more specifics for you to wrap you head around.
- JOBS matter – We live in an era of uncertainty. With congress waiting until the last minute to finalize tax rates and government spending, it’s difficult to know what taxes and government spending will look like from year to year, or even month to month. This leaves businesses with the inability to plan, and as a result, the inability to hire. Uncertainty leads to fewer jobs; by some estimates the unemployment rate would be 2% - 3% lower if we had more certainty. That’s between 3.1 million and 4.6 million more jobs. (1)(2)
- EDUCATION matters - Chances are, if you’re in college or recently graduated, you have student loan debt. If you have federal student loans, you’re helping to pay for the government’s spending. Right now, federal student loan interest rates range between 6.8% and 7.9%, depending on your loan. Those rates are much higher than markets rates and the rates government borrows money at. In fact, even if you include the cost of running the student loan program, the interest rates charged by the government are high enough to bring in additional money; essentially the government is taxing students through the loan program to help pay for other programs in the federal budget.
- INVESTMENT matters – We invest less in our future then we did when our parents were growing up. In 1962, 14 cents of every federal dollar not going to interest was spent on entitlements, today that amount is 47 cents. By 2030 it will be 61 cents. (3)
- TAXES matter – For those entering the workforce or already working, you know that the taxes taken out of your paycheck is money you earned but cannot spend. If we don’t reduce the deficit and get the government on a more sustainable fiscal path, the taxes you’ll be paying in the future could be as much as double today’s rates. For example, in less than a decade our government will be spending over $1 trillion a year on interest payments alone. The government will have to raise revenue, through higher taxes or increased borrowing, to just pay for the debt we’ve already incurred. (4)
- NATIONAL SECURITY matters – Former Chairman of the Joint Chiefs of Staff, Admiral Mike Mullen says “Our national debt is our biggest national security threat.” That’s because we borrow nearly half of our money from overseas, and if an international conflict were to occur, the U.S could find itself in a position of not being able to borrow enough money to fund the budget. If that’s not a wake-up call, we’re not sure what is. (5)
- THE ENVIRONMENT matters – We care about the future, and for many of us that means we care about the environment. Having money to spend on research and development is key, not only to developing sustainable energy, but also many of the programs that keep us a competitive country. As a percentage of the economy, we spend half of what we spent in the 1960’s on research and development. (6)
- HEALTHCARE matters – Access to affordable healthcare is something we all want. Whether you support Obamacare or not, there is no arguing that we need to make changes to our system. In the last decade, we have seen healthcare premiums increase by 97%. That’s substantially higher than wage increases and economic growth in the last ten years. (7)
- SOCIAL SECURITY and MEDICARE matter – We all want to know that Social Security and Medicare will be there for us if we need it. Left unchanged, these programs will stop paying full benefits in 2033 and 2024, respectively. A good part of the reason is because we are living longer, benefits have increased and, as Baby Boomers retire, fewer of us will be paying into the system. No one wants to take away from those who currently depend on the system, but we should make sure that all of us who need it can part take in the system. (8)
(6) http://www.whitehouse.gov/omb/budget/Historicals - Table 9.7