Tyler Poppe

July 29, 2012

ECON 2020
KT Magnusson
The Nation Debt
The national debt crisis is a very interesting topic that has created many differing
opinions throughout the years. As found in the article Reining in the National Debt, it is an
issue that has been around since the beginning of our nation. One that George Washington found
necessary to address in his farewell address in 1796. George Washington in that speech advised
against the building up of debt and encouraged the Americans, as well as the government, to stay
out of debt. As also found in the article, that advice has not been well taken, or maybe not well
followed, and as Bill Clinton gave his final State of the Union Address in 2000, the national debt
had reached $5.5 trillion. With that, Bill Clinton gave us hope that with the correct fiscal policies
we could eliminate the national debt within the next 13 years. However, in those 13 years we
have seen the debt tripled (McGraw-Hill 2013). These alarming statistics leave many Americans
wondering what will become of our nation if the debt continues to rise. In this essay some of the
reasons and concerns for the national debt will be addressed, as well as some of the possible
solutions for the national debt.
The debts main source comes from the needs of the individual. A principle of economics
is that want exceeds our scarce limited resources (McConnel-Brue-Flynn 2012). The
government will often use an expansionary fiscal policy to try and boost the economy. This
includes increased government spending, tax reductions or a combination of both. With such
policies the budget deficit will grow even larger. We have seen this pattern in recent years with a
growing budget deficit since the year 2001 where we saw the last budget surplus (McGraw-Hill
2013). With these statistics it seems that the national debt will be a continuing issue as our
country continues progressing and growing.
What are some of the concerns of a growing national debt? There are a few serious issues
related with this topic; income distribution, incentives, foreign-owned debt, and the crowding-out
effect from continuous refinancing. These concerns vary in seriousness but it is necessary to
address and realize that the national debt is a problem and steps do need to be made to put an end
to excessive government spending (McGraw-Hill 2013). In the article Reining in the National
Debt some theories on how lowering the national debt may be achieved are discussed and
analyzed.
Annual budgets is one theory that has been brought up and tried in the past. In the past
we havent seen much progress made with the annual budgets, in the article they are even called
temporary band aids. That seems to be pretty accurate given that they havent really given any
results and seem to not be followed much of the time. It seems that these budgets lack a long
term approach, and it may be because the politicians that are creating these budgets arent
thinking long term and are thinking about their little time in the position that they hold or in the
following election, if they cut government spending and the economy is hurt for a while what
will happen? Whatever the reason may be that these budgets havent had much success but it can
change now. In order to avoid future problems, the government may need to seriously consider
making long term goals and reduce spending.
As annual budgets have begun to fail the government has tried to implement other tactics
such as deficit ceilings, spending caps, PAYGO, sequestration, and even a balance budget
amendment. With each idea there has been different benefits and different disadvantages. After
the implementation of each plan, eventually nothing really gets done or the policy put in place
gets ignored. Similar problems have been seen such as the problems formerly addressed with the
annual budgets, politicians creating policies possibly with other motives. These policies have not
had the effect wanted or needed.
A problem that needs to be addressed are the policies taken to help our economy. Does an
expansionary fiscal policy really help our economy? In the business cycle there will be times of
recession and in these times government spending and reduced taxes does seem to be a quick,
proven fix, at least temporarily. Also in times of wars this is a quick way to boost the economy.
But in the long term government intervention may not be the best policy. With a policy of no
government interference the economy will balance itself out with the law of supply and demand,
and if we are allocating our resources efficiently. If we are using the resources that we already
have and following debt ceilings that are put in place, or a budget system, we will see progress
made in lowering the national debt and we can still obtain maximum economic efficiency if we
are using our resources correctly. Sometimes the best thing a government can do is let the
economy balance itself out.
So what will actually be done to fix this problem? It seems that this is a question that has
been asked often and the answer has yet to be found. But one thing is certain, if we continue
spending more than we have we will never lower our national debt. In my opinion we need
stiffer fiscal policies and officials who will follow what has been decided. It seems that we have
no sense of direction on what to do with our national debt and we need to make some goals to
make progress. I believe that George Washington had many good reasons for what he said about
the national debt and if we follow his counsel, and the counsel of many other well respected
officials as to this matter, and begin to lower our national debt, we will begin to create a sure
foundation for many generations to come.


















Works Cited:

McConnel-Brue-Flynn. Macroeconomics 19th edition. 2012.
McGraw-Hill . "Reining in the National Debt ." The Economy Today News Flash, February 2013.