For the last decade or so, I have become increasingly concerned about the federal debt, now estimated to be $21.13 trillion.
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It is an issue one does not hear much about in the 2018 campaigns, in large part because the voters have not demanded clarity on ways to address annual deficits and the long-term federal debt.
This is important because, at some point in our future, an “economic reckoning” will come from the continuing growth in federal spending and debt. As David Davenport, a fellow at Stanford's Hoover Institution, wrote earlier this year in Forbes, "No one really knows how much federal debt is too much. Unfortunately some kind of major economic correction will be the signal that we have gone too far. Other countries will quit buying our debt, or will discount it heavily. The stock and bond markets will lose confidence in our fiscal policy and send prices plunging."
He notes that we are creating our own “bed of instability” when the government spends far more than it takes in. One day, writes Davenport, “the bed will begin to collapse.”
Tim Penny a key player
One key player in all of this is former Minnesota First District congressman Tim Penny: He has long been trying to do something constructive about fiscal issues including deficit reduction, entitlement reform, fundamental tax reform and improving the budget process.
Penny and many insiders familiar with federal fiscal policy believe that America's national debt threatens our future and that our nation’s leaders, including President Donald Trump and members of the U.S. House and Senate, ought to be well enough versed on the implications to act with a comprehensive, bipartisan plan.
Such a campaign must mobilize key communities — including leaders from business, government, and policy — and average people all across America have a role to play. Special attention must be paid by all to securing a workable “safety net” for those who most need it.
New federal tax law
Take, for example, the new federal tax bill that was passed by Republicans in Congress and signed into law by Trump last December. At that time, the significant tax cuts for both individuals and corporations were projected to be repaid by increased economic growth due to the projected stimulus resulting from the cuts.
The first six months of this year, however, have shown that’s not entirely the case. The reduction in corporate taxes paid, for example, is the lowest since 1943, down some 33 percent. The tax cuts for individuals have not yet been fully analyzed and will not be until mid-2019, well after the 2018 election.
Another complication is the growing momentum for additional spending to provide tax relief for manufacturers and others, especially including a proposed $12 billion tax cut for farmers hurt by the expanding tariff-induced trade wars with our partners.
10 pending issues affecting federal budget
At least 10 other controversial issues that have significant financial implications for the federal budget are, as noted by the Committee for a Responsible Federal Budget:
- Concluding the ongoing wars in Iraq and Afghanistan
- Raising the Social Security normal retirement age to 68
- Increasing defense funding levels
- Tightening border security and building a border wall
- Providing a workable plan to address undocumented immigrants
- Increasing infrastructure spending
- Increasing Social Security benefits
- Modifying the Obamacare health care reform law
- Increasing nondefense discretionary funding levels
- Reforming the estate tax
Both political parties will need to compromise to find a path forward.
These issues and others are timely as Minnesotans go to the polls on Nov. 6 to elect two new U.S. senators and eight U.S. House members, at least three from closely competitive districts that are on both parties' top priority list.
The good news, of course, is that all of this is happening as the national economy is the healthiest it has been in decades, growing at a 4 percent annualized rate.
Chuck Slocum is president of the Williston Group, a management consulting firm. Contact him at chuck@willistongroup.com
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