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Federal Debt = No Easy Solutions

March 2, 2012

The time to balance the budget is now

President Obama recently released his 2013 fiscal year budget. The proposed budget will add approximately $1 trillion to the national debt, which is currently around $15.3 trillion.

Let me put this number into perspective. If you spend a dollar every second, you will have spent a million dollars in 12 days, a billion dollars in 32 years, and a trillion dollars in 31,000 years. You would have to travel around the world at the equator 40 million times to equal a trillion miles.

The government began to think about what it would take to pay off the national debt in the late ‘90s, and the nation was on pace to do so. Then, under President George W. Bush’s presidency, the debt went from $5.6 trillion to almost $10 trillion. Now, under Obama’s administration, our country has gone up to $15.3 trillion in debt.

Our nation’s debt can be thought of a little more realistically by comparing it to a U.S. household that earns $55,000 a year while spending $96,500 — 175 percent of the family’s income. In one year, this family would add $41,500 of debt to their current credit card debt of $366,000. If all U.S. households do this, it would add up to the federal debt.

Although our federal government, debt, and budget are different than a household, some of the same ways a household can get out of debt would work for our government. Families who are in debt have two options: make more money or spend less. In extreme situations, households need to do both. So does our federal government.

One of the first basic ways to balance a budget is to cut spending. For an individual who has major debt and budget troubles, he or she needs to look at the top dollar items such as housing and transportation.

The U.S. also needs to look at the big areas of its budget. Three programs account for about 60 percent of all our country’s spending: Medicare and Medicaid, Social Security, and Defense. In 2010, these areas accounted for $2.1 trillion. Unless we cut everything else the government spends money on, including interest payments on the national debt, we can’t continue to fund these three things and balance the budget. As if this isn’t bad enough, these programs will be strained even more as more baby boomers reach retirement.

Increasing income is another way for an individual to balance his or her budget. This usually is done by picking up an extra part-time job. Although this is usually a temporary fix, a little extra work can help someone out of a deep hole a little faster.

The federal government really can’t moonlight extra jobs, but it does collect taxes, which would increase revenue.

Former Reagan and Bush Sr. policy advisor Bruce Bartlett points out that the government currently collects only about 14.7 percent of its Gross Domestic Product in taxes. This is the lowest rate since 1950. This basically means we are paying less of a percentage of taxes than we have over the past 50 years. The Bush tax cuts did not produce strong growth; it hurt our tax collection.

Over the next couple of weeks I will look at a few of these issues more in depth because changes the federal government will have to make will affect all of us and how we handle our personal finances. It is time for us as a nation to make sacrifices. We need to expect less out of our government, and we will need to pay a little more for the services we receive.

This is a tough mindset to have, but we are left with two choices. We can sacrifice a little now, or a lot later. Every day we wait to make tough cuts and decisions, we are making the problem worse. As the political campaigns rage on through the year, we need to go from asking, ‘What can you give us?’ to ‘What sacrifices do you think we should make?’

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