Debt Ceiling Debate - How to Cut Spending
Background information
Our country’s future is becoming more unstable as we heap piles of debt on ourselves and the next generation of Americans. Our national debt is skyrocketing at an alarming rate and has recently hit our nation’s debt ceiling. The American economy is approaching a breaking point—and the debt ceiling is a tool for the American people to reel in Washington’s spending problem and restore fiscal order and stability to our country.
What is the issue at hand?
Just like any other balance sheet, the federal government has sources of revenues (raised mostly via taxes) and a list of expenses. Each year, the government spends more on these expenses than it raises from taxes.
Early leaders of the United States decided to carry national debt as a way of establishing credit to take out more debt if need be, and we have carried debt almost ever since. When this incursion of debt becomes undisciplined and uprooted from fiscal responsibility it risks causing tremendous damage to the economic security of the nation—and the global economy.
When spending exceeds revenue in a given fiscal year (FY) it results in a budget deficit. The federal government’s cumulative deficits equals the national debt.
When the federal government spends at a rate exceeding its revenue, it can do so by going into one of two kinds of debt: intragovernmental debt or public debt. Intragovernmental debt occurs when federal agencies borrow money from the treasury, effectively meaning the government borrows from itself. Public debt is debt held by the “public” and includes foreign governments, individuals, mutual funds, state and local governments, and other entities.
This debt is issued by the Department of the Treasury in the form of Treasury notes and bonds.
The United States has reached its current debt ceiling of $31.5 trillion. In the coming months, Congress will have to decide whether or not to raise the debt ceiling and allow the government to keep borrowing money. But most importantly, Congress will have to decide whether or not it will cut spending to put America on a sustainable economic path.
Why should I care?
A productive, prosperous, free economy improves the quality of people’s lives. It enables Americans to live without fear of how they will pay for housing, food, or other essentials. It gives a feeling of security and greater optimism for their future. And it generates innovations in technology that save lives and increase convenience.
But this prosperity is only sustainable if our nation’s leaders exercise financial discipline. Debts must always be paid. When our country enters into debt, future taxpayers will have to pay off that debt.
Right now, the federal government is playing with our future to benefit their political present, and it needs to stop. If the government continues to spend and enter into debt as it has been for the past few decades, our economic stability will be at risk.
Why is this a problem?
The federal government does not have a revenue problem; it has a spending problem. Federal revenue from taxes is at an all-time high by any measure, whether that be nominal terms, real terms, or as a percentage of GDP.
Yet, spending has outpaced revenue dramatically—our national debt is now 120% of the nation’s entire economy. Even the cost of fighting in World War II did not create this much debt. If Biden gets his way, spending will increase by another $2.5 trillion, totaling 130% the size of the economy.
All this spending pumps money into the economy, which creates upward inflationary pressure. Inflation occurs when there is too much money chasing too few goods and services. Not only was there a disruption in supply of products and services because of COVID-19 lockdowns, but there was also a dramatic influx of money into the economy through stimulus checks and nearly $2 trillion in Democrat led spending bills—including the $1 trillion Infrastructure package, the $250 billion CHIPS Act, and the roughly $500 billion for Inflation Reduction Act.
To combat this inflation, the Federal Reserve has been raising interest rates. This only makes it more expensive for the government to borrow the money it needs to pay off its own debt.
This vicious cycle will only add to the debt and spending crisis that has already cost Americans nearly $6,000 in real annual income.
In the first 215 years of the history of the country, the United States accumulated $7 trillion dollars in debt. The federal government has now added more than $7 trillion of debt in just the past 3 years.
There are only two ways out of this debt: inflation and taxes, or reducing spending. If we do not reduce our rate of spending, we risk even worse economic conditions. And every dollar that is inflated or taxed away from us is one less dollar going to our prosperity.
What can be done?
The debt ceiling is an important tool to protect the American people—it’s a check on endless spending and debilitating debt. Under no circumstances should the debt ceiling be raised without a plan to rein in spending and move towards a balanced budget.
There are many steps that need to be taken to address this problem, but the first is to attach spending cuts and fiscal reforms to any increase in the debt ceiling.
First: Congress can begin to rein in spending by capping spending levels at fiscal year 2022 levels.
Second: For every dollar the debt ceiling is increased, there should be an equal decrease in spending.
Third: Spending cuts should come from cuts to bloated programs and other systemic reforms.
Fourth: Congress should enact reforms that boost economic growth and increase prosperity and have the added benefit of generating more tax revenue for deficit reduction. Every dollar the government doesn’t spend, is a dollar that private individuals can invest.
If Congress can muster the political discipline to put the prosperity and future of Americans before their own short-term political interests, then we have reason to hope the future will be brighter than the present.
The Pew Research Center recently found that 84% of Republicans and 68% of Democrats believe that strengthening the economy is a top priority for Biden and Congress. And a majority of those polled also agree that deficit reductions are included in that priority.
TAKE ACTION: Call Congress NOW and tell them not to sell our future. It’s time to rein in the out of control deficit spending.
Explainer Video
Video # 1: What is the Debt Ceiling?
Learn More:
- Heritage Action Executive Director and Heritage President: Congress Must Rein in Unaccountable Bureaucracy and Inflation in Debt Ceiling Debate
- The Heritage Foundation: Don’t Give an Inch on the Debt Ceiling
- The Heritage Foundation: Federal Budget in Pictures
- The Heritage Foundation: 6 Charts Show America’s Big Debt Problem
- The Heritage Foundation: These 7 Charts Show Why Congress Must Get Spending Under Control Immediately
- The Heritage Foundation: Heritage President Speaks to Media on Biden-McCarthy Debt Limit Negotiations
Key Points
The debt ceiling is an important tool to protect the American people. The debt ceiling isn’t the problem—reckless spending is the problem. The debt ceiling is a tool to force Congress to develop a solution (a better budget to control spending).
Federal spending is out of control. The current national debt is six times what it was in 2000. This exponential increase will only get worse if we don’t make serious changes very soon.
Continuing on the current path is not an option. Continually racking up national debt and then increasing the debt ceiling so we can spend more is a vicious cycle that can only end in disaster. Decisive action is needed to put the country on a better course financially.
Americans are ready for change when it comes to national debt and spending. 84% of Republicans and 68% of Democrats believe that strengthening the economy should be a top priority for Biden and Congress.
The solution is to cut spending and institute pro-growth reforms. These changes will not be easy, but they are crucial to creating a sustainable future for the nation.
Call Notes
My name is [NAME] and I am a constituent from [CITY, STATE].
I am calling to ask [MEMBER OF CONGRESS] to support spending reforms. Congress should NOT raise the debt ceiling without a plan to control spending.
The debt ceiling is an important tool to protect the American people from endless spending in Congress.
Any debt limit increase should result in equal spending reductions. For every dollar that the debt ceiling increases, spending should decrease by an equal amount.
The U.S. National debt is now more than $31.5 TRILLION! The increased spending in recent years has driven inflation and saddled our children with even more debt.
It is about time to implement some self-discipline and put forward a plan to control spending. Now is the time!
I urge you to support sustainable spending. Congress should not raise the debt ceiling without passing a plan to cut spending.
Thank you for passing along my message.
Have a good day.
Social Posts (remember to insert the social handle of your member)
.@[MEMBER], say NO to a clean debt ceiling increase. Any debt ceiling increase needs to include spending cuts & reforms.
Federal spending is out of control, and something needs to change. Increases in the debt ceiling must be accompanied by spending cuts and pro-growth reforms.
It’s time to STOP the spending. @[MEMBER], don’t raise the debt ceiling without spending cuts and pro-growth reforms.
A high national debt means high inflation and high taxes for all Americans. It’s time for a NEW solution: a debt ceiling increase has to be side-by-side with spending cuts and reforms.
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