Online, Student Articles — October 24, 2012 at 2:44 am

America’s Greatest Threat? The Debt Crisis

By Roderick Miller*

At a time when the United States is engaged in military conflicts around the world and international terrorism poses a constant danger, America’s greatest threat may be one of its own design. This threat manifests not in the form of a bullet or a bomb, but as a growing mountain of debt that may spell the economic and military ruin of the United States if decisive action is not taken to address the problem.

Despite the potentially disastrous consequences of bankruptcy or near-bankruptcy for a sovereign nation, myriad state governments have failed in the task of keeping their debt and deficits at responsible levels. As the European sovereign debt crisis of the past few years has demonstrated, even countries such as Greece, Ireland, and Portugal–highly developed states with established traditions of democratic governance–are capable of pursuing a path of unsustainable deficit spending that can result in forced austerity and economic crisis.

In the last decade, the United States has demonstrated that it is susceptible to the same fiscally irresponsible tendencies as Europe, and is consequently now facing a debt crisis of its very own. Since 2000, a perfect storm consisting of multiple wars, excess government spending, and rising entitlement costs, coupled with decreased government revenues resulting from tax cuts and a struggling economy, has left public debt as a percentage of GDP at its highest levels since WWII. Specifically, the total public debt of the federal government has now risen to over $16 trillion, by far its highest level ever in absolute terms, and an amount that exceeds the total GDP of the United States for 2011. Federal spending continues to exacerbate the debt crisis, with an additional $1 trillion being borrowed each year in order to fund annual deficits. This is the highest level of deficit spending in American history, with approximately one-third of every federal dollar that is expended having to be financed with borrowed money.

The government’s current fiscal trajectory is unsustainable, but little has been done to address the problem. Congress has not passed a binding budget resolution in over three years, refusing to set out a blueprint for how much money the government will collect in taxes, borrow, and spend on an annual basis. The debt ceiling debates of 2011 brought the federal government to the brink of defaulting on its debts, and ultimately resulted in a legislative compromise that was insufficient to prevent Standard and Poor’s from downgrading America’s credit rating. Thus far, political gridlock has foiled all attempts to address America’s debt crisis in a responsible manner. This leaves it as no surprise that Congress is at its lowest level of popularity in over a generation.

Unfortunately, a failure by the government to decisively address public debt and deficits in the near future will threaten more than the economy of the United States. It will also fundamentally undermine America’s national security. Indeed, as federal deficits have increased over the past few years, the Department of Defense’s budget has been disproportionately targeted with severe cuts. That budget may be further reduced to dangerously low levels if the sequestration mechanism triggered by last year’s super committee failure is not dismantled by the end of this year. As it currently stands, defense spending as a proportion of the federal budget and national GDP is near historically low levels for the post-WWII era. As debts and deficits increase, pressure may build to continue funding irresponsible levels of federal spending by bleeding the defense budget rather than tackling the politically risky subject of runaway entitlement spending, which is the real driver of the federal debt.

In this time of global instability, the United States cannot afford to remain on its current fiscal path. Maintenance of the status quo is unsustainable and will imperil both the economy and the security of our nation. Now more than ever, America needs the courage and honesty required to bring a balanced budget back to Washington.

* J.D. candidate, Harvard Law School, 2013; B.A., University of Pennsylvania, 2010.

Leave a Reply

Your email address will not be published. Required fields are marked *

*

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>