Background: Over the last ten years, the federal government has spent at a higher level than it ever has in American history. In fiscal year 2015, the federal government spent a total of nearly $3.7 trillion or almost $30,000 per U.S. household. The current rise in federal spending has resulted in over $19 trillion in total national debt. Federal debt held by the public is now equivalent to 74 percent of the entire U.S. economy.
Economic research demonstrates that advanced economies with debt levels surpassing 90 percent of GDP experience significantly slower economic growth. Excessive federal debt could slow economic growth, raise interest rates, increase inflation, discourage private investment, limit access to capital, undermine the global competitiveness of U.S. business, and eventually cause a financial crisis that could destroy our economy for years.
While some politicians blame the rise of the national debt on lower taxes, the problem is clearly irresponsible federal spending. Federal revenue totaled $3.2 trillion last year – the highest amount of revenue the federal government has ever collected in its history. Additional tax increases is not the answer.
Discretionary Spending: Discretionary spending is the annual amount of money spent by the government through appropriations. This includes funding for services include defense, education, welfare, and other programs. Discretionary spending over the past ten years is historically high. Congress should cut discretionary spending now and at least enforce the spending caps agreed to under the Budget Control Act (BCA) of 2011 to bring current spending under control.
Mandatory Spending: Mandatory spending is the money on “auto-pilot” or the amount of money the federal government has already promised to spend through current laws. This includes funding for Social Security, Medicare, Medicaid, Obamacare, and interest on the national debt. These programs are responsible for 83 percent of the projected increase in spending over the next decade. Mandatory spending accounts for two-thirds of the federal budget but will engulf the entire budget in fewer than 20 years, leaving no funding left discretionary programs.
To reduce mandatory spending and avert this fiscal crisis, Congress must address our major entitlement programs. To start, Congress should repeal Obamacare, which will save $2 trillion over the next decade. Additionally, Congress should pass serious legislation reforming our entitlement programs for future retirees. Without reforms, Social Security and Medicare will both be insolvent within 20 years.
Solution: Congress must act now to both reduce discretionary spending and mandatory spending. Doing so will help avoid this economic catastrophe and allow present and future businesses to operate in strong economic environment.