Gallup reported today that 66 percent of Americans cited some economic issue as the most important problem facing our country today.Only 8 percent said the federal budget deficit or federal debt. Yet, these two issues are intrinsically linked.
Exit polls in New Hampshire’s Republican primary yesterday showed that 6 in 10 voters viewed the economy as the deciding factor in their votes, despite lower than average unemployment (5.2 percent). Though real GDP and a host of other economic indicators improved in the third fiscal quarter of 2011, many Americans see this increase in economic fortunes as marginal and remain solicitous.
The American people are not yet confident in the nation’s economic security. The federal government and previous stimulus spending have not gotten us out of the economic hole entirely, and have, in fact, raised our federal debt to a volatile and unsustainable level.
Stop and think about that for a moment. Our government has borrowed as much money as the market value of all goods and services produced within the United States in the past year. Every cheeseburger, every iPad. Everything that we, as a country, have consumed. The national debt equals the size of our economy.
Despite this, liberal economists like Paul Krugman have urged Congress to spend even more, to run even higher deficits and to ignore growing debt levels in the short term.
In his most recent video on the federal debt, former CBO director and President of the American Action Forum Doug Holtz-Eakin points out the relationship between the size of debt and economic growth. A large body of economic research has shown that debt levels equal to 90 percent of GDP or greater are correlated with diminished economic growth. The national debt has passed that threshold and is projected to climb even higher.
The CBO’s assessment of the President’s 2012 budget projected the federal debt held by the public to reach $20.8 trillion in 2021.Now is the time to start reducing that number while simultaneously boosting the confidence of the American people in our government’s ability to positively affect the economy and do what is fiscally responsible.
As Congress gears up towards another session, the Obama Administration and members of Congress should keep in mind fundamental tax and entitlement reform, not another dead-on-arrival American Jobs Act. Waiting to do something big reduces the benefits of such an action down the line, and people are tired of waiting.