Why the U.S. Government Should Not Get Out of Debt

The question of whether the U.S. government should reduce its national debt has been a topic of considerable debate. While some argue that eliminating debt is necessary for economic stability, others contend that maintaining a certain level of debt is beneficial. This article will explore the arguments against reducing the national debt and why it is more pragmatic to severely restrict its average growth rate rather than attempting to eliminate it entirely.

Why Debt Isn't Always Bad

While some argue that the government should reduce its debt, it is important to consider that not all debt is inherently harmful. For instance, government loans such as VA home loans and student loans contribute positively to the economy. Moreover, history shows that the last time the U.S. had no debt, it led to a significant recession due to the government's lack of resources to mitigate economic downturns. This prolonged recession further highlights the importance of a certain level of government debt in providing fiscal stimulus and support during economic crises.

The Risks of Reducing Debt

Reducing the national debt would require drastic measures such as significantly increasing taxes or cutting essential government programs. Both options have severe economic consequences. Increasing taxes would put a strain on consumers and businesses, leading to reduced spending and investment. On the other hand, cutting government programs would undermine public services and social safety nets, potentially causing social unrest and additional economic instability.

The Legacy of Reagan, Bush, and Trump

It is also crucial to acknowledge the impact of past administrations on the national debt. During the periods of Reagan, Bush, and Trump, significant tax cuts were implemented without corresponding budget reductions or increases in business taxation. This approach exacerbated the debt, contributing to 65% of the current national debt. Additionally, the ongoing costs of the Iraq and Afghanistan wars added another 15% to the debt. These examples demonstrate that relying solely on tax cuts without addressing underlying fiscal imbalances is a recipe for long-term economic instability.

Sweden's Approach to Fiscal Responsibility

A more practical approach would be to follow Sweden's model, which restricts government spending through constitutional amendments and sets average spending growth rates below a pre-established limit. This systematic approach to fiscal responsibility ensures that the government operates within narrowly defined parameters, preventing excessive debt accumulation. Sweden's method has been successful, as it balances economic growth with fiscal stability.

The Consequences of Debt Reduction

Reducing the national debt would entail taking money from the private sector and giving it to the government, essentially moving it from productive uses to bureaucratic ones. This reallocation of resources would diminish job creation, business expansion, and infrastructure development. Furthermore, the process of reducing debt often results in a recessionary effect, as reduced government spending can lead to decreased demand and economic contraction.

Conclusion

While it is important to manage government debt responsibly, attempting to eliminate it entirely can be counterproductive and potentially disastrous. Instead, the focus should be on severely restricting the average growth rate of the national debt while ensuring that essential public services and infrastructure are maintained. By adopting a more balanced and sustainable approach, the U.S. can effectively manage its fiscal responsibilities without damaging its economic prospects.