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Richard Romboy
K.T. Magnusson
Econ 2020
1 August 2014
The United States National Debt and Growth Potential

America is a country of debtors in a world that runs on credit. The modern and ever
more global economy flows on the ebb and tides of credit and debt. As most Americans will
agree it is impossible to live without credit. It is absolutely necessary to cut through the politics
of the American economy to understand what the numbers really mean. Unfortunately in our
currently deadlocked bi-partisan system, each side is using the numbers to shock and confuse
the American public for their own benefit. I do not advocate that there is no debt problem in the
United States. Fiscal policy and Government spending dance an intricate and dangerous jig with
the countrys future and serious mistakes have been made. However, if we understand the
forces at play, and learn quickly America can find itself once again in a more solvent position.
Most modern economic theory is based on outdated ideas. In my study of this subject I
am stunned that we have the audacity to call ourselves modern Capitalists, when all of our
decisions seem so dangerously outdated. The manifest destiny of democracy and the peace
dividend are two such recent historical examples. These ideas come to us from the devastation
stemming from the Second World War. To believe that it is our duty to spread democracy (and
therefore capitalism) to the world as a whole, based on the rebuilding of nations destroyed by
multinational war, is simply nave. The massive rise in productivity, wealth, and the middle class
is based on other countries inability to compete industrially and thus birthed the ascension of
America to the premier economy in the world. But the idea of the peace dividend died with the
advent of modern war in Vietnam, as did the force-feeding of capitalism. The Iraq and
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Afghanistan Wars coupled with the Central and South American conflicts of the 1980s solidified
these lessons of Vietnam.
America has thought of itself as the only solution to the worlds financial and political
problems for one war too many. It is imperative that we stop spending our political and
economic capital on risky ventures. The few countries large enough to go to war against each
other now have too much invested in each other to do so. Although I am no isolationist, the
creation of three failed states (Iraq, Afghanistan, and most recently Libya) should teach us that
not all countries are in the position or even willing to adopt democratic capitalism. Instead we
should redouble our efforts to improve our tarnished reputation abroad. America and capitalism
still offer the best guidance for wealth creation, quality of life and personal freedom. Countries
such as China and Vietnam that have adopted aspects of the market system of their own
volition are experiencing incredible growth while India has exploded into the largest democracy
on earth. With trade comes treaties and peace. An America with friendlier market-based
relationships will prosper.
The wars in Iraq and Afghanistan are estimated to cost us $4-6 trillion with every cent of
it financed (Foster). We find ourselves in a precarious position because the cost of these two
wars is already sunk but we have yet to pay for them. America has gone into debt for illusory
safety. The trifling amount of trade, countered by our costly military and social expenditures has
left us on the wrong side of the balance sheet. The opportunity costs of the wars will force our
economic hand towards our own citizens and have sped up dramatically the urgency of
curtailing our domestic debt and our budget deficit. Projections estimate that we will have two
more years of deficit reduction before the rising cost of Social Security to baby boomers really
kicks in. By 2030 it is estimated that for every person on Social Security there will be only two
active income tax payers (Sahadi). Healthcare costs are also expected to take a huge dent by
within the next 5 years (Sahadi).
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We must not be afraid of the national debt. For years all I heard was the amount of the
debt but I did not really understand that we owe most of it to ourselves. Dramatic positions such
as abolishing Social Security and scare mongering about the imminent bankruptcy of our
country divert our votes and attention from reality and positive action.
The Affordable Care Act has cost less than expected and the budget deficit has
decreased for the last few years. As the economy expands the right measure of pressure could
sustain growth. The current amount of money spent on national defense and military actions
could and should be diverted to peacetime projects. In order to avoid another recession when
Social Security and Healthcare costs begin to drag down our output we should adopt New Deal
style policies of rebuilding our infrastructure. Bridges, highways, and electrical grids are the oil
that lubricates our industrial and technological machines. Improvements at home will lead to
more innovation and invention, strengthening our economy and the worlds demand for our
unique products while creating more jobs domestically.
The United States is still the trailblazer for technology and we are still competitive in
some heavy industries. The world relies on our expertise and our dollar. We have a comparative
advantage through our IT, and Aviation sectors. This in addition to our use of new methods of
producing energy and harvesting fossil fuels places us in a stronger position than almost any
other country. Many Americans have returned to work, and I am no exception. Employment is
much easier to find than during the height of the recession but we are not at full capacity yet.
Curtailing spending, creating jobs at home and forging stronger international trade agreements
can increase our GDP and offset costs solidifying our position as the worlds most important and
productive economy.

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References
Foster, Peter. "Cost to US of Iraq and Afghan wars could hit $6 trillion." The Telegraph.
Telegraph Media Group, 29 Mar. 2013. Web. 1 Aug. 2014.
<http://www.telegraph.co.uk/news/worldnews/northamerica/usa/9961877/Cost-to-US-of-Iraq-
and-Afghan-wars-could-hit-6-trillion.html>.

Londoo, Ernesto . "Study: Iraq, Afghan war costs to top $4 trillion." Washington Post. The
Washington Post, 28 Mar. 2013. Web. 1 Aug. 2014.
<http://www.washingtonpost.com/world/national-security/study-iraq-afghan-war-costs-to-top-4-
trillion/2013/03/28/b82a5dce-97ed-11e2-814b-063623d80a60_story.html>.

Sahadi, Jeanne. Uncle Sam Runs $114 Billion Surplus in April. CNNMoney. CNN, 8 May
2014. Web. 1 Aug. 2014. <http://www.CNNMoney.com

Congressional Budget Office. www.cbo.com Web. 1 Aug. 2014.

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