February 27, 2013

Photo credit: Newscom

Amidst our other economic woes, another looms: stagnant growth resulting from our government’s high debt. As more and more debt accumulates, private investment is crowded out, leading to weaker growth.

When debt reaches 90 percent of GDP, economies experience significant growth problems. Heritage Foundation economist Salim Furth explains:

In one study, Manmohan Kumar and Jaejoon Woo of the International Monetary Fund (IMF) find that high-debt economies grew 1.3 percentage points slower than their low-debt counterparts. The negative effects of debt builds steadily as debt grows from low (below 30 percent of GDP) to high (above 90 percent).

Over a decade, a difference of 1.3 percentage points of growth would be $11,000 more—or less—every year per family in the U.S. That’s enough to send the kids to a state college or move to a nicer neighborhood.

Over the last several years, government debt has risen at an alarming rate. Counting federal, state and local debt, “U.S. debt has zoomed from 48 percent of GDP in 2007 to 84 percent in 2012,” Furth reports.

“We stand at the 84 percent threshold,” he continues, “and we may either lurch ahead into a future where high debt and low growth are facts of life for a generation or hold back and allow our economy to grow faster than our debts.

There is a way out of this. We still have time to tackle the national debt–but time is running out. Heritage’s “Saving the American Dream” plan outlines how we can restore economic growth by slashing federal spending, making taxes fairer and flatter, and otherwise getting government out of the way.

How would you go about cutting the debt?

Comments (23)

Klara Sever - February 27, 2013

It is high time to counterbalance the socialist education and daily lies of administration with concrete examples of catastrophic results of the totalitarian economies. I experienced 30 years of that and now it followed me here.Can hardly believe that! Let us reverse this sick trend.
Klara Sever

william schirmer - March 5, 2013

I have a proposal but it is too large for this space. Who can I send it to?…..e-mail address please. Thanks.

Bill

Lloyd from Florida - March 5, 2013

The only way to cut the debt is to first cut out deficits by cutting entitlement spending, eliminating all unnecessary government programs and spending, cutting our military obligations to the sole protection of our own US soil & very limited other interests, increasing our domestic energy production of all types ( oil, coal, gas, wind, nuclear and other types) to world class status to reduce our manufacturing costs and allow increased employment and exports. When we have completely stopped the deficit spending, Congress could then consider passing a plan for a 10% tax surcharge on all income taxes annually to pay off the national debt with this charge only to occur in years following a complete balanced budget. Congress would then be forced to ration carefully our spending because if they overspend, they do not get the debt pay down the next year. A plan like this would increase our dollars value, restore confidence in our finances and make us the envy of the world. The payoff of our debt would take about 20 years but the social security and medicare entitlements could be preserved at lower levels. This program would involve a lot of pain for all of us but if we do nothing the ultimate result is economic devastation for the country. History shows us that this will happen and the longer we wait the more pain created.

Ellen Elmore - March 5, 2013

We can cut the U.S. debt by defunding Obamacare and raising the age to receive Social Security and Medicare.

William Szuch - March 5, 2013

We only need to look back 30 years where the U.S.S.R. was dismantled due to excessive debt and the collapse of the government. At the beginning of Obama’s administration the stimulus of $787B was instituted as a one-year effort to stimulate the economy, it has now been part of the budget for 4 years. Remove the $787B from the Federal Budget as the original proposal stated and return the spending levels to 2008. There would still be a deficit but a much smaller one to manage.

James Boyd - March 5, 2013

We need to cut superfulous research, consulting contracts, unemployment benefits, consolidate redundant departments an eliminate a bunch of them. Get the government out of education. Studies show that early childhood education does not benefit by the 4th grade. Tighten up on SS disability. And on and on and on.

J.D. Boyd, Ph.D.

PaulE - March 5, 2013

The more we adopt the failed economic model of socialism here, the more our economy will mirror its ultimate effects and outcome. The examples of where all this will lead are available to anyone with access to either the Internet or even a TV, provided of course you don’t spend all your time watching the mainstream media propaganda broadcasts. If a majority of the American people are either too lazy or too stupid to save themselves from a completely preventable disaster, and that is what this is, then we will end up as yet another failed socialistic experiment in the history books. That is of course assuming that the history books will reflect some semblance of actual history and not the revisionist nonsense currently being published.

George Goodwine - March 5, 2013

How would I go about cutting the debt? 1) A hiring freeze
on all government agencies. Let attrition gradually reduce the size
of government. Government workers would have to shift between
agencies as they are downsized to keep their jobs until retirement.
Very special qualifications would be contracted out on a project by
project basis. 2) Corporate taxes would be cut on a wait and see
basis if it generates industry in the U.S. and increases total
revenue. 3) Cut foreign aid drastically. 2) There will have to be a
broad based individual progressive income tax increase by closing
loopholes. Everybody pays some tax unless truly impoverished. 3)
Stop nation building and getting involved in foreign land wars.
Build a very strong Navy and Air Force. Rely more on unmanned air
weapons. Retaliate massively on the enemy’s infrastructure if
attacked. Do not rebuild them. 4) Make civics a required part of
the education system where every citizen understands the U.S.
Constitution, knows how to file a Small Claims. 5) Install tort
reform in the courts. 6) Practice TRUE Keynesian economics. Build
up surpluses during the good years so the government can stimulate
with very substantial infrastructure building programs during
recessions. Building surpluses for this purpose should take
priority over social spending programs.

Henry Teja - March 5, 2013

If the US federal government & all the combined
state governments do not get back to or under 15% of GDP for the
federals & 3-8% of GDP for the combined states by 2019 then
this country will not be as we know it prior to 1975 or even 1995.
The other fact the Federal Reserve must be stopped &
removed from the US financial equation. They are running a double
dipping operation for both large domestic & foreign banks
owning 61% or better of the US debt & has been manipulating
the US & global economies for their own profit &
not for the American tax payers interest. The federal government
needs to cut the national debt by $6-8T over the next 6 years
& another $5-8T over the following 8-10 years to stablize
our economy & monetarty system. Then we need to go back on
a gold &/or silver standard to force both federal &
state governments to balance budgets & spend only what they
receive in tax reveunes not exceeding 15% of GDP & 8% GDP
for the combine states.

Robert Peacock - March 5, 2013

Reduce funding to those government departments and agencies
so that eventually they will cease to exist. Probably easier than
doing away with a complete department , such as EPA, Education and
others I am sure…

Ron Violette - March 5, 2013

I very much agree with the comments of Lloyd from Florida.
We likely would not get all of the suggested cuts, but it is time
to quit making lists and then ignoring the list. Let’s get on with
it !!!!!!!!!!!!

Robert Schuster - March 5, 2013

Regarding debt in general, you are missing the boat with
the hi-flown language – 90% of GNP is bad, etc. Tell them what it
means to be unsustainable, like most retirement programs are right
now. Ask where payment for the next “add on” is coming from. Thin
like the average person.

Peter Twight - March 5, 2013

Something simple that is hard to avoid: cut everything
across the board by 5% ,at the same time giving all administrative
heads flexibility to shift funds according to priorities so tht the
level of decision is pushed to the lowest possible level where
there is knowledge about the agencies programs. Do this until gov’t
income matches expenditures. Require publicly published budgets
from all.

Mary J McConnell - March 5, 2013

We need our friends and should not turn out backs, but we
need to be realistic about protection we can and cannot afford. We
need to cut the soaring debt and the way to do it is to cut the
frills and recreation and all these earmarks in our laws.We are in
a fight for survival now and cannot continue to live high on the
hog. I don’t have a car of my own, but I have a condo and am
getting more education. We need to cut spending drastically and
only necessary things should be retained — things pertaining to
health and income, keep taxes low so the economy can grow. if
consumers stop spending money there will be more and more
bankruptcies, as business losses will force more companies out of
business — and the downward spiral grows. Saving money is
important not only for individuals and families but saving money
for America and being “in the black”.

Sheila Ford - March 6, 2013

Citizens in each state have to demand that their state
legislators REJECT federal “money”. This money is non-existent. It
has to either be printed or borrowed. No one in America is ENTITLED
to ANYTHING! The government was instituted to ensure our G-d given
rights to life, liberty and property (the accumulation of what we
have EARNED). That’s its ONLY job. WE have let congress get away
with enticing people to believe what they WANT to believe– that
government has “free” stuff to give them. Now, congress is afraid
to tell people there is no “free” stuff. If they stop, “bringing
home the bacon”, they’re afraid they’ll lose their jobs. “The
States are independent sovereigns and sometimes they have to act
like it.”, said John Roberts. States have to refuse all federal
“funds” and refuse to comply with coercive federal programs. It
needs to start by rejecting “ovomit””care” which is the largest
federal program ever; specifically designed to encompass the entire
population in a scheme to, “…control the people.” (cong.john
dingell, 23 March, 2010)

Michael Doyle - March 6, 2013

Social Security and Medicare should be turned over the the
Insurance Industry that knows how to manage programs like these.
The FICA funds should be off limits to the government for anything
other than Social Security. Every bill passed needs to include
where the funding is coming from and any assumptions made
concerning the cost and the funding. Congress needs to get honest
and use accounting methods that are required for business. Stop all
pork, PERIOD! Bills should be written in plain English using
language a high school graduate can understand. All government
agencies should be audited by non-government organizations.
Accountability is a requirement. Actual expenditures vs. the real
budget should be published and made public every month.

Sam Barlotta - March 6, 2013

How to cut the budget? Immediately I would eliminate the
Department of Education, the Department of Housing and Urban
Development, privatize Amtrak, reduce the Post Office to 5 days a
week of service, eliminate the Federal Government student loans
program, and repeal Obamacare. Then I would privatize Social
Security. I would make Medicare optional. I would eliminate all aid
to Planned Parenthood and all federal aid to childcare. I would
require all federal agencies to reduce their budget in real terms
by 5% a year for the next 5 years. I would require the Congress to
pass a balanced budget act. I would eliminate the Federal Reserve.
I would tell Congress that only Congress can pass laws, meaning
that NO federal agency can pass a law affecting America or the
American people–they can only recommend a law to Congress for
approval. I would institute a flat tax with no exemptions (15%).
And lastly, I would tell Congress to eliminate all programs, laws,
and agencies that do not have a direct link to our Constitution and
the federal government’s listed duties.

Arlin R. Johnson, Jr. - March 6, 2013

Going to flat tax like tithing with everyone, even those on
welfare paying something into the operation of our country,
Learning to live on what your net income ends up being is a needed
education for all Americans – and the American Government should be
at the top of that list! The foolish spending Washington continues
on even in the face of the major economic problems we are facing.
First step end the IRS and go to a flat tax. Reduce or end some
departments of the Federal Government. Start with the IRS, then
take down HUD, EPA, NEA, and end pork “deals” forever! That should
save big time. America should never do anything that would make our
military weak. Of course, Obamacare needs to be dumped so a health
care program that is well thought out and free of communist
thinking would be a good start. Last – God the Bless Heritage
Foundation – keep up the good work!

Larry Wilkins - March 6, 2013

We should reduce the corporate tax from it’s present rate to say 10 to 15 percent. Have a simplified tax code like a flat tax. Put more public lands up for sale to private individuals. Term limit all politicians, have all government duplicative offices and policies eliminated, absolutely no pork in any bill, all bills that are put up shoul be less than 20 pages. Reduce all foreign aid by 50 percent. Any countries that receive aid that are not our supportive alley, cut the, off. When you look at this objectively, it is just common sense which our goverment does not have.

Pauline Swanson - March 6, 2013

The first two places for “cutting” should be the complete DEFUNDING of Obamacare and the TOTAL DEFUNDING OF Planned Parenthood. There is NOTHING in the Constitution that ‘allows’ “government” a place in healthcare — nor in the SLAUGHTER OF THE INNOCENT!
Then address energy costs by producing from U.S. sites; ‘address entitlements’ (far too many able-bodied are ‘on the dole); pass the Fair Tax (eliminating the IRS) and pass a Balanced Budget. Get rid of ALL so-called ‘representatives’ who do not institute these measures!

field retterer - March 7, 2013

First, we need a leader(s) who know how to say “no”. As Amity Schayes said recently the model we need is Calvin Coolidge. Then we must focus on entitlements beginning with Obamacare and then Social Security. Obamacare MUST be repealed, and we must design a replacement that will work by removing government from the equation except for possible tax credits. Social Security is easier. For those within ten years of retirement maintain the program( I can provide details) For those outside ten years of retirement discontinue the program and return all money plus compound interest at the ten year T-bill rate in effect durng the years of their participation–same with employer money.
For those receiving benefits calculate the current amount of money accumulated if both employer and employee money earned at the ten year T-bill rate throughout years of participation. If this amount the falls short of the benefits already received the retiree would continue to receive benefits for two more years to allow ample time to find a way to replace the benefits.If the amount exceeds benefits paid, benefits would continue for two years, also to allow time to find a way to replace the benefits. This approach would quickly identify the fraud perpetuated by the federal government for many years.

Holly Chapo - March 11, 2013

Cut taxes and reform the tax code to make it flatter and more workable. Open drilling and fracking on federal lands. Bring in the XL pipeline. These two will provide many jobs and increased revenue to the fed govt. Repeal Dodd-Frank. Defund Obamacare. Get rid of all spending that is classified as “waste, fraud and abuse” and which has been identfied very clearly by the Office of Budget and Management. Create and stick to a balanced budget and pass a balanced budge amendment. Significantly cut the budgets for the various departments that act like their own private fiefdoms. Start eliminating regulations. Reduce the size of government via attrition and redo the pay scales for federal workers. Cut back on all foreign aid to our enemies. AND reform entitlement spending – all of it.

Howard Woods - March 11, 2013

easy-peasy: just give everyone a couple million dollars.

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