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The debate over the national debt is one of the biggest, yet least understood, issues of the 2012 election cycle. The mechanisms behind the debt are numerous and complex, and economists do not agree on the terms of the total. The media suggests estimates from $11 trillion to $16 trillion. According to the Treasury Department, the national debt is $15.9 trillion. The size of the debt is important because limitless spending is unsustainable, and if the United States ever defaults on payment, it would not only wreck the U.S. economy but would also send the global economy into depression.
It is important to note that the debt has not caused anything; instead, it is a consequence of choices the country has made in taxing and spending. Every year the government must raise money to run its programs, pay its employees, and provide the services we enjoy as a nation — services including things like the military, Social Security, Medicare/Medicaid, highways and infrastructure, scientific research, and education. These services are popular, and many are essential, but they are costly, so to fund them we need an enormous annual federal budget. The government can finance its budget a few ways: raising taxes, which is politically unpopular; printing money, which leads to inflation; or borrowing money, which creates the debt, through the sale of U.S. Treasury bonds. Borrowing is convenient because it allows the government to spend more money than it makes: it means services aren’t limited to what the government can pay for today. Instead, when the United States borrows, it has access to all the financial resources that any entity would want to lend on credit; the United States will pay them back with interest at some future date. Borrowing pays for expensive government services and allows Americans and American businesses to hang onto their money and spend it in the economy, which in general spurs growth. However, when the government borrows and spends more than it takes in, it runs a deficit. The national debt is the unpaid total of budget deficits, plus interest, year after year.
In recent years, the debt has skyrocketed. In 2001, the debt was around $6 trillion, and the White House reports an increase of $12.7 trillion in the last decade. This is an unsustainable trajectory, and according to the Congressional Budget Office, the interest payments alone could bankrupt the government in the not-too-distant future. The danger is that if the people, businesses, and other countries who have lent money to the government begin to doubt that it can pay back what it has borrowed, they will stop lending money, which means it will be harder for the government to come up with money to fund services, and much harder to pay off the enormous debt already owed. Some of these creditors may even request that the government pay them back immediately, and if everybody does this at once, the U.S. Treasury will not be able to pay back all of those loans and will go bankrupt. The War on Terror, steadily increasing healthcare costs, the tax cuts passed by President George W. Bush in 2001 and 2003, tax revenue lost to the recession, and economic stimulus have all contributed to the national debt.
The national debt forms the intersection for two huge 2012 campaign issues: the state of the economy, and the role of government in Americans’ lives. The debt is tied inextricably to government spending, taxes, the stimulus bills, national defense, and entitlement programs like Social Security. Because many American families are currently facing tough economic choices themselves, the debt debate has also been infused with strong emotions and values: themes of outrage, justice, and responsibility. One popular analogy for the national debt that plays on these emotions — one you’re likely to hear both candidates use — is that the government is basically a family running up a credit card. This is a misleading comparison, however, because the government’s debt is much more complex than a family budget.
Governor Romney’s budget proposal promises to cut spending. He proposes to balance the budget by repealing the Patient Protection and Affordable Care Act (also known as “Obamacare”) and eliminating all “nonessential” government spending, while extending the full Bush tax cuts and leaving the defense budget untouched. He will point to President Obama’s policies — the stimulus, the Affordable Care Act — and to the debt that has increased by $5 trillion on Obama’s watch, and claim the Obama administration hasn’t been a responsible custodian of the economy. Mr. Romney himself has not been specific about what he considers nonessential spending, but as a candidate he may not have to be. He wants to make the case that he is the candidate who will make the necessary tough decisions to whip the country back into shape. His is a populist argument: taxpayers ought to use their money how they see fit, and the country must bring an irresponsible government under control or face financial catastrophe.
President Obama proposed a budget that significantly increases taxes on the wealthiest Americans and biggest American businesses. He will acknowledge the debt must be controlled, and point to what he believes are the successes of his spending, such as the economic recovery, and all the money that the Affordable Care Act will actually save the country. The president also proposes significant cuts to “excessive” defense spending, and will say he ended a costly and unnecessary war in Iraq and is bringing the troops home from a protracted engagement in Afghanistan. He will agree that the country must cut spending, but with a fragile economy these cuts need to be strategic and balanced with increased revenue. In further contrast to Mr. Romney, Mr. Obama proposes to end the Bush tax cuts on those making more than $250,000, another populist argument: the little guy vs. the selfish and irresponsible business culture that caused the economic crash of 2008. And unlike Mr. Romney, Mr. Obama is obligated to govern: his argument is policy, so he must be specific and bipartisan, and his numbers must add up.
-This article was written by Roger Sollenberger and appears in full in The IDEA Guide to the 2012 U.S. Presidential Elections.