On the Issue of Debt - Essay Example

Section/# On the Issue of Debt This brief analysis will consider what this believes to be the most pressing and important issue surround the seemingly ever-increasing levels of debt that both federal and state budgets are currently facing. Furthermore, as a function of this increase in overall debt, the negative externalities that such a change portends are vast and systemic. Whereas in previous times the degree and extent to which governments dealt with the issue of debt has always been a high concern for law-makers and citizens, the level and extent to which the current situation weights upon both the government decision makers and the electorate is unprecedented. As a result, the very nature of governance the degree to which this process encompasses nearly every aspect of society and the economy has only exponentially grown (Eichler 1216). For those that are concerned with the overall sovereignty and freedom of the society, this has naturally become a primal concern due to the fact that many nations are able to leverage the United States due to the level of its debt that they hold in the form of bonds and other financial mechanisms. Furthermore, as a function of these factors that have thus far been enumerated upon, this brief work will seek to elaborate upon some key mechanisms through which the problem itself can be lessened over time. The Simpson-Bowles committee put forward what many outside of the realm of politics would deem a fair approach to an infinitely complex issue. The mixed approach that this committee put forward hinged upon the need to make budget cuts, re-work the tax plan, secure Social Security, and reduce the size of the annual budget deficit. The reason that the plan was not latched on to by either political party is due to the fact that it required both an increase in tax revenue and a decrease in spending/budget cuts in order to make the goals that it defined (Croxson 103). These two mechanisms specifically are precisely what must be targeted for the federal (as well as state) budget deficits that currently exist to be minimized. As it is painfully clear, seeking to reduce and/or cancel budget deficits and debt in a relatively short period of time is beyond the realm of possibility. As a result of this, each political party and or leader wants to ignore the issue due to the fact that no political capital can ultimately be gained by seeking to fix an issue that they themselves nor their party will ever receive credit for; however, the larger issue is the fact that the debt crisis threatens the very sovereignty and vitality of the nation, its economy and society (Barth 98). The issue itself is not only a concern for future generations, although this is perhaps one of the greatest concerns that helps to define the size and scope of the problem. Rather, the issue weighs heavily on the way in which the government, both state, federal, and local, seek to provide key services to the communities which they serve. Rather than building more parks, maintaining infrastructure, and providing a litany of other adequate services, the government is forced to expend a large percentage of its annual budget (which itself is already over and above current tax receipts) to service the debt that currently exists. What this portends is a situation in which the government is borrowing money in order to pay the interest on the money that it is already borrowed. It does not take a degree in advanced economics to instantly realize that such a stance is untenable and cannot be long continued without the structure and legitimacy of the entire economic system falling into a state of collapse. As such, the current status quo with regards to debt level and spending is both untenable and unwise. One need look no further than examples of Greece and other nations to rapidly realize what maintaining a dangerously high percentage of debt to national GDP portends. Similarly, whereas the solution mechanism may be a shared sacrifice over a period of many years, the alternative is far more traumatic and could have consequences that could prove disastrous for the American society and way of life. Lastly, this analysis will discuss the national sovereignty issue as it relates to the litany of nations that hold a high percentage of the US sovereign debt. Since the birth of the modern state, it has been common practice for other nations to invest in their counterparts debt by buying bonds and via other financial tools. As such, such a practice is not in and of itself a net evil. However, when a nation is heavily leveraged, as is the case with the United States, the extent to which foreign nations control large percentages of its debt can have a directly adverse affect on the way in which its national sovereignty is expressed. As such, this is yet another key concern that this brief analysis wishes to bring to the attention of the reader as a means of better understanding some of the core issues associated with maintaining a high debt to income ration on a systemic level. Although this brief analysis has been far from exhaustive with respect to the many nuances that exist and help to define the issues related to the level of debt exposure that the United States government must realize, it is the hope of this author that it has at least illuminated the reader on some of the key issues related to the mechanics of how the government should seek to extract itself from the given situation that it currently finds itself within. In order to provide a means of escape, it is the belief of this author that a balanced approach that both seeks to cut expense while re-working the tax code to ensure that revenues increase while expenses decrease is one of the only logical ways in which the nation can hope to see a bright future from the debt problems that currently face it. Works Cited Barth, James R., and Tong Li. "US Debt And Deficits: Time To Reverse The Trend US Debt And Deficits: Time To Reverse The Trend." Economic Affairs 32.3 (2012): 97-101. Business Source Premier. Web. 14 Dec. 2012. Croxson, Karen, Susan Lund, and Charles Roxburgh. "Working Out Of Debt." Mckinsey Quarterly 1 (2012): 96-107. Business Source Premier. Web. 14 Dec. 2012. Eichler, Stefan. "The Impact Of Banking And Sovereign Debt Crisis Risk In The Eurozone On The Euro/US Dollar Exchange Rate." Applied Financial Economics 22.15 (2012): 1215-1232. Business Source Premier. Web. 14 Dec. 2012. Read More