The Potential Benefits and Consequences of Paying Down the National Government’s Deficit or Debt

Debating the merits of reducing the national government’s deficit or overall debt is a contentious topic, deeply rooted in political ideology and economic theory. The idea of paying down this debt is often met with resistance, especially when it is proposed that future generations would bear the financial burden. However, the potential benefits of decreasing the national deficit or overall debt cannot be ignored, and understanding these can help inform better fiscal policies.

Conservative Concerns and Political Implications

The divide over addressing the national debt is a significant political issue in the United States. For conservatives, any increase in government spending, especially to support less fortunate individuals, is a difficult pill to swallow. This is exacerbated when there is a suggestion that future generations will have to shoulder the burden of this debt. The mere mention of such policies can trigger a visceral response, particularly when it affects the economic well-being of their children.

Conservatives are often wary of higher taxes to support current government programs. Slightly reduced final paychecks are a more tolerable compromise, but the idea of future generations paying for today's support is a step too far. The inherent tension arises from the fear of compromising the future economic stability of their offspring. Any increase in national debt while these programs are in place is perceived as an indirect attack on their children's economic prospects.

Reduction in Servicing Costs

One of the most significant benefits of reducing the national deficit or overall debt is that it decreases the burden of servicing the debt. For the fiscal year 2025, a notable reduction in the deficit can lead to a decrease in the servicing costs, which currently stand at one trillion dollars annually. By reducing the debt, the government can reallocate these funds to other beneficial purposes, such as infrastructure development, education, and healthcare.

Addressing External Debt and International Relations

A considerable portion of the USA’s national debt is owed to US citizens and state governments, or to parts of the US government, such as Social Security. If we were to pay off approximately half of this internal debt, it could help in reducing the amount of money leaving the country. However, this approach has its drawbacks, as well. Foreign entities holding US debt generally have a vested interest in the continued success of the USA, but paying off external debt may reduce the pressure on the USA to maintain its economic and political stability.

The Economic Impact of Debt and Borrowing

Reducing the deficit or debt effectively means eliminating a significant outgoing payment, which can redirect resources to productive uses. If funds are borrowed and spent today, the economic benefit is often short-lived. The real cost of borrowed money is the reduced economic activity in the future, as interest payments and principal repayments cut into available funds. This is a financial flaw that government employees and economists often overlook, assuming that future income increases will outpace debt payments.

Without a stable economic foundation, debt-financed growth can lead to economic downturns. The heavy reliance on borrowing by government employees and officials, who benefit from current power and income, can create long-term fiscal instability. Addressing this issue would involve eliminating legal avenues for government borrowing and ensuring that government employees save for their retirement, just as private sector workers do. This approach can lead to a more stable and sustainable economy.

Conclusion

The conversation about paying down the national government’s deficit or overall debt is not straightforward. While there are valid concerns about the impact on future generations and international relations, the potential benefits of fiscal prudence cannot be ignored. Reducing the burden of servicing the debt can free up funds for critical infrastructure and social programs, while addressing the economic impacts of borrowing can lead to a more stable and sustainable future for all citizens.