Fixing the National Debt with Better Alternatives

Government, like individuals, borrows money and has debt. Debt can be a problem if you have too much and can’t make the payments. It can be a problem if you are using debt for the wrong reasons. Partying on the credit card is not good. Using debt to invest in your future (buying a house, starting a business, going to college) can be a wise choice. Unfortunately much of our federal spending is not spent wisely to build the public good or invest in our people’s future.

There are three major causes of federal debt: excessive military spending, excessive health care costs, and tax breaks.

Historically the Pentagon has consumed about half the discretionary budget. This only includes the Department of Defense, nuclear weapons costs, and the Overseas Contingency Fund (wars in Iraq and Afghanistan). It does not include ALL the “national security” related spending. For example, the Veterans Administration, which is directly related to the consequences of war, is not included. When the Department of Homeland Security, Department of State, the FBI, Veterans Administration and defense related interest on the debt are included the total national security spending is 85% of the discretionary budget! This is before the recent 10% increases in defense spending.

No other nation spends anywhere near this amount on defense. There are many ways to reduce spending and achieve better financial controls without hurting security. But neither political party has had the political will to take on the vested interests that profit from our national security paranoia.

Another driver of national debt is healthcare costs. We have the most expensive healthcare in the world. The federal government is a major buyer of healthcare services. Health care is the fastest-growing category of federal spending and in 2015 totaled $1.1 trillion. This is almost as much as the total discretionary budget. The Defense Department spends 10% of its budget on healthcare so fixing this problem would also reduce military spending!

Most of this spending goes to private, for-profit healthcare providers, insurance and drug companies. The “healthcare industrial complex” costs, like military costs, are out of control. The excessive cost of healthcare impacts individuals, businesses and government at all levels. A rational, comprehensive, universal national healthcare system is needed to control costs.

The third major cause of deficits and national debt is tax breaks. Tax breaks have a cost just like spending (economists call them “tax expenditures”). The cost of various tax breaks adds up to more than the entire federal discretionary budget. Even though almost everyone qualifies for some tax break, most of the benefits go to higher income folks. Most of the value goes to the upper 20% of income earners. Many tax breaks benefit large businesses.

Tax breaks have long standing bi-partisan support. No one is going to mess with the home mortgage deduction, for example, even though it costs $70 billion a year and does little to actually promote home ownership. The biggest tax expenditure is the employer deduction for employee health insurance ($236 billion in 2018). Again, a single national healthcare program that covered everyone would make this unnecessary. A comprehensive system would be far cheaper (and better for most people) than the current fragmented maze of public, private, and non-existent insurance.

Budgets are about choices. Congress could choose to spend our national resources more wisely. We could have national health program that covered everyone and controlled costs. We could invest in debt free college and job training for everyone. We could have a world class public transportation system. We could lead the world in environmental protection and green energy. We could create prosperous, clean, safe, sustainable local communities. We don’t lack the money. We lack the wisdom and political will to make it happen.