The policy position that I will defend is that the United States should stop its borrowing and focus on filling its spending deficit by collecting more revenue from taxation. The US debt includes all the amount of money in dollars owed by the national government. As of February 2019, the federal debt was at $22 trillion (Amadeo, 2019). The main reason for the ballooning of the national debt owes to tax cuts that have been experienced in the country. A tax cut is defined as the reduction in the tax as charged by the government. Tax cuts, therefore, mean that the government has limited ways of collecting revenue thereby reverting them toward the path of extensive borrowing. As a general rule, government debt goes up when the government has a deficit. However, it falls when the government has a surplus. The increased borrowing and hefty debts will place a burden on future generations. Therefore, it is imperative for the government to consider a self-sustaining model that promotes sustainability. The current president should suspend all borrowing endeavors and instead increase taxation for the overall good of future generations. However, it should be noted that overtaxing could also have an adverse impact on the economy by placing an increased burden on the people. However, this will spur the economy and create enough money to complete the impending projects. If the culture of extensive borrowing continues, future budgets would be dedicated to repaying the loans (Kumar & Baldacci, 2010). As such, this will live little for development and catering to the recurrent expenditures. The new policy will put a pause to borrowing and embark on tax efficiency where every person, business entity, and import trades are taxed appropriately. New taxes will be created to cover the existing deficits. The national debt has risen to an equivalent of 75% of the gross domestic product. From my perspective, this is a major concern that should worry the leaders and policymakers in government. When a government borrows money, it must pay it back with interest. The interest form a fundamental part of the national budget created every year. The increasing debt can have adverse effects on the economy especially in cases where the government prints more money to pay off the debts. As a consequence, the inflation rates will increase leading to a reduction in the value of bonds (Kumar & Baldacci, 2010). A country that continues to borrow and does not pay will also have problems with the borrower who will doubt the country’s ability to fulfill their obligation. If the doubts are severe, they could eventually affect the bond market, thus having a recoil effect on the country’s economy. With the continued increase in the national debt, the US will possibly sink into a dilemma on how best to repay the money. The US will be forced to enter into new borrowings or increase its taxes to cater to the principle and interests. Some countries have even gone to the extent of monetizing their debts. However, each of these options has a negative effect. Whereas increasing the tax could offer valuable sources of revenue, it risks hurting investment and consumption. It could also affect the GDP and the rate of employment. Monetizing the debt could cause inflation in the country, especially in cases where the money supply is huge. Therefore, the ever-increasing US debt should send warning to the government (Kumar & Baldacci, 2010). The country must focus on establishing efficient and sustainable ways of raising money to cater to its needs. Although borrowing is inevitable, it should not be a culture.
References
Amadeo, K. (2019). The US Debt and How It Got So Big Five Reasons Why America Is in Debt. The Balance. https://www.thebalance.com/the-u-s-debt-and-how-it-got-so-big-3305778
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Kumar, M. M. S., & Baldacci, M. E. (2010). Fiscal deficits, public debt, and sovereign bond yields (No. 10-184). International Monetary Fund.
