The National Debt—Going, Going, Gone? Part 2 (of 2 articles)

The views expressed are those of the author and do not necessarily reflect the views of ASPA as an organization.

By Stephen R. Rolandi
September 17, 2020

In last month’s PA Times, I described at some length the growing problem of the national debt in the United States, which in recent months has been exacerbated by the crippling effects on the nation’s economy caused by the COVID-19 global pandemic.

As of today, the current total National Debt of the United States stands at approximately $26.8 trillion, and the Gross Domestic Product (GDP) is approximately $19.6 trillion, which works out to a debt-to-GDP ratio of 136.7%. It has been projected that at current rates, and if no corrective actions are taken, that by the year 2024, the comparable figures would be a total National Debt of $47.6 trillion, and GDP of $26.4 trillion, for a projected debt-to-GDP ratio of 180.3%. The comparable current debt load per person in the United States currently stands at about $81,000 for every man, woman and child in the nation.

I firmly believe that the American economy will recover from the crippling effects of the corona virus pandemic, but that the recovery in some sectors will take longer than others. The 2024 out-year projection may not be as ominous as forecasted, but in my view, will still be critical.

But there is cause for concern. As I had noted in my last article, nations such as Greece, Japan and Venezuela have had very high debt levels in recent years, with negative effects on those countries’ economies. Further, one only needs to look at Argentina in the 1940s and 1950s and Germany during the years of the Weimar Republic in the 1930s to see that extremely high debt levels can have very harmful effects on democracy and constitutional governance (for an interesting economic history of the debt crisis that contributed to the collapse of the Weimar Republic, see Professor Tobias Straumann’s recent work on the 1931 German debt crisis).

Many economists, such as Paul Krugman as well as nationally prominent syndicated journalists David Brooks (of The New York Times) and Mark Shields will tell you that now is not the time to deal with the growing national debt, and that the immediate priorities are to bring the COVID-19 pandemic under control and begin a comprehensive program of economic recovery.

It is true that the current inflation rate, as measured by the Consumer Price Index (CPI) and others, is relatively low, as well as interest rates in the United States. In addition, the Federal Reserve Bank officials are currently considering leaving interest rates at near 0% through 2023.

However, the growing national debt can become a perfect storm, unless we as a nation plan to deal with it, over the next 4-5 years.

Practitioners and scholars of public finance and budgeting will tell you that the way to deal with large budget deficits and debt is to adopt revenue (individual/corporate tax income and user fee increases), cut budget expenditures or grow the economy—or some combination of these three options, and to try to be equitable and fair in the process. One also has to have the political environment which such measures would be considered.

One way to accomplish this would be to establish a bi-partisan commission of the U.S. Congress (House and Senate), White House (Executive Branch) and private sector. Some examples come to mind, such as the bi-partisan commission of the mid-1980s that made recommendations to keep the Social Security program financially solvent.

Another more recent example is the 2010 National Commission on Fiscal Responsibility and Reform (more commonly called the Simpson-Bowles Commission) which made a series of recommendations to Congress including an increase in the Social Security retirement age; military, benefits and domestic spending reductions; and tax increases such as the elimination of certain tax credits and deductions as well as increasing the Federal gasoline tax. While proponents praised the Simpson-Bowles Commission recommendations, they failed to win significant support in Congress.

The failure of the Simpson-Bowles Commission should not deter the nation from trying again, particularly as the national debt and debt-to-GDP ratios have worsened since 2010. I believe that this is a proposal that good government and public service organizations, such as ASPA and others, should seriously consider undertaking next year. 

As I write this article, I note that today (September 17^th) is the 233^rd anniversary of the signing and adoption of our Federal Constitution by the delegates who gathered in Philadelphia that hot summer many years ago. This day of national observance is referred to as Constitution Day and Citizenship Day.

In previous columns this year, I have urged the Federal government, the states and the private sector to work collegially on critical fiscal issues during this pandemic, and not at cross-purposes.

I believe that now is also the time for us in ASPA—not only as practitioners, teachers and students of public administration—but also as citizens, to take constructive action to bring about workable solutions to these critical issues.

The cause endures!

---

Author: Stephen R. Rolandi retired in 2015 after serving with the State and City of New York. He holds BA and MPA degrees from New York University, and studied law at Brooklyn Law School. He teaches public finance and management as an Adjunct Professor of public administration at John Jay College of Criminal Justice (CUNY) and Pace University. Professor Rolandi is a Trustee of NECoPA; President-emeritus of ASPA’s New York Metropolitan Chapter and past National Council Representative, as well as many other association boards. You can reach him at: [email protected] or [email protected] or at 914.536.5942.

(1 votes, average: 5.00 out of 5)
Loading...