Introduction
Problems of the national economy affect every citizen, not only politicians and economists. As Scott Bittle and Jean Johnson write in the preface, Where Does the Money Go? is not a book for policymakers. Instead, their work clarifies the problem of the U.S. national debt for “people, who care where the country is going, but not have time or inclination to become budget experts” (Bittle & Johnson, 2008). Therefore, the authors explain key issues of the national debt in a relatively simple language and provide their opinion on how the country got into that situation and what could be done about it.
In the beginning, the book provides a brief breakdown of major risks posed by the growing national debt. Bittle and Johnson (2008) put an ironic remark that the first consequence will be a special debt clock running out of digits since the debt was below $10 trillion when the book was published. Nowadays, the debt reached over the $28 trillion size, so it is logical to assume that these risks are still relevant (U.S. National Debt Clock: Real Time, 2021). First of all, Social Security and Medicare for the retired will “bust the federal budget wide open” at some point. Secondly, the borrowing for handling the county’s debt could cause a severe economic recession. Lastly, if foreign holders of the U.S. debt put their money elsewhere, that would crush the stock market (Bittle & Johnson, 2008). Therefore, the growing national debt poses a threat of a major economic collapse.
In the following chapters, Bittle and Johnson elaborate on the details. In particular, they provide the debt’s structure and explain why the American politicians are reluctant to introduce debt-cutting measures. The book ends with a list of suggestions from the authors, which could be implemented to contain the debt. However, as one can see, both Obama’s and Trump’s administrations could not fix the problem. The following sections will address three key issues of national debt to provide an understanding of why this matter is so complicated.
Medicare
Bittle and Johnson listed the Medicare program as one of the biggest reasons for growing budget expenses. In general, their explanation can be shortened to the following: numerous baby boomers retire and start receiving health care payments, and health care costs themselves are rising. A combination of these trends creates cumulative pressure on the federal budget. Therefore, the authors paint a bleak picture — at the current rate, the government will have only three options by 2040. All these options are equally unpleasant: slashing other spheres to afford Medicare, a heavy increase of taxes for the working population, or cutting Medicare for the elderly (Bittle & Johnson, 2008). In the end, the authors proposed fourteen measures to lower the costs of Medicare before the situation comes out of control. Some of these measures, for instance — the raising of retirement age up to 70 or the introduction of new national taxes, seem rather unpopular.
While Bittle and Johnson provided convincing evidence that Medicare costs could create a significant burden for the budget, their solutions seem harsh for the population. In that regard, it seems more fair to optimize Medicare by lowering the costs rather than squeezing money from the citizens to fund it. Woolhandler and Himmelstein (2019) argued that a federal-level transformation of Medicare into a single-payer system like in Canada or European countries would improve access to health care and make it more affordable. For instance, the insurance overhead in American care reached $301,4 billion in 2019, and the Canadian single-payer system could have saved an estimated $238,7 billion (Woolhandler & Himmelstein, 2019). These funds and physicians’ time spent on billing could have been directed to patient care.
The high-level politicians have seemingly adopted the idea of universal health care. According to Oberlander (2019), the presidential candidates and lawmakers give the concept of “Medicare for All” more serious consideration. One day America would hopefully abandon overly complicated and expensive Medicare in its current state and implement a transparent, affordable, and universal health care system that works effectively in many other countries. Doing that would allow avoiding the implementation of unpopular measures proposed by Bittle and Johnson.
Domestic Politics
Another issue about the national debt is its place in debates on the political level. According to Bittle and Johnson (2008), liberals and conservatives battle each other instead of developing a solution to the debt problem. American politicians have to constantly run for offices, which causes them to avoid unpopular topics. Combating national debt would likely require raising taxes and cutting some popular areas of expenditure. Therefore, the politicians prefer avoidance and instead of mentioning or implementing possibly controversial solutions. As a result, a terrifying situation emerges when the politicians know about the debt but do not dare to do anything meaningful to lower it.
In that regard, Bittle and Johnson seem to be absolutely correct. According to Yared (2019), the margin of victory in the U.S. presidential election has been in decline since the mid-1980s. Therefore, the elections have become less predictable, and even the slightest controversy can cost the candidate a victory. Analysis of U.S. congressional elections has also revealed the trend of declining margin of victory (Yared, 2019). Rising uncertainty in election outcomes seems to be a plausible reason for ignoring the national debt problem. The example of such behavior is relatively fresh — in the 2016 presidential campaign, neither Trump nor Clinton touched the subject of national debt (Stuart, 2018). It seems that only the repetition of the Great Depression would change this trend of deliberate ignorance, and the politicians will start taking action when combating debt becomes not only essential but popular.
International Influence
The final issue about the U.S. national debt is extra unpredictability derived from the international influence. By 2008 the debt owed by the United States was roughly about $9 trillion, and more than $2 trillion of that amount was owed to foreign banks and investors. (Bittle & Johnson, 2008). In particular, China held more than $420 billion of the U.S. debt, which gave the Chinese government powerful leverage against America (Bittle & Johnson, 2008). For example, the Chinese could have stopped buying U.S. Treasury bonds, creating a global distrust towards the American economy. However, doing so would have harmed Chinese businesses, so the Chinese government has not used the U.S. national debt as a weapon of economic war.
Time proved that concerns expressed by Bittle and Johnson in 2008 are quite accurate. According to Wang and Zeng (2020), the Chinese leadership, especially during Xi Jinping’s presidency, demonstrated confidence in China’s leading role in the global economy. Donald Trump’s administration answered Chinese ambitions by shifting America’s stance to China from cooperation to competition (Wang & Zeng, 2020). While Trump’s effort to maintain American leadership in the world is understandable, the Chinese influence over the U.S. debt made confrontation with China an extremely risky step. Bader (2018) expressed concern that attempts to contain China like USSR during the Cold War would likely result in American isolation since many American partners are deeply entangled with China economically. In addition to that, open hostility towards China would give it an incentive to weaponize the U.S. national debt, leading to the scenario described by Bittle and Johnson.
Conclusion
Bittle and Johnson made me realize that the growing national debt poses a real threat to the American economy. The situation around the debt is threatening because worst-case scenarios would affect every citizen of our country. Even more alarming is that combating such a large debt would likely require the introduction of unpopular measures. For instance, the cuts in health care, social security, and education would directly hurt elderly people and youth. However, the most frightening part is an apparent neglect of the debt problem by our politicians. What is even more terrifying — I understand why the politicians avoid speaking about debt since mentioning anti-debt measures would likely result in defeat on the election day. The knowledge that China can utilize American national debt to put our government in line is also quite worrying.
Therefore, I find it challenging to give recommendations to a potential candidate. Given that mentioning the debt problem would likely result in defeat, I would suggest avoiding that topic during the election campaign. I would recommend solving the debt situation only after securing the office. After that, I would suggest implementing anti-debt measures starting from mentioning the harshest ones but introducing less strict ones at first. I reckon that this strategy would make the anti-debt campaign more acceptable for the population. In any case, being in charge of reducing the U.S. debt would be an unpleasant experience. Any politician who decides to cut the debt should be prepared, that many Americans will curse their name.
References
Bader, J. (2018). US-China relations: Is it time to end the engagement?Brookings Institution Policy Brief.
Bittle, S, Johnson, J. (2008). Where does the money go? Your guided tour to the federal budget crisis. Harper Business.
Oberlander, J. (2019). Navigating the shifting terrain of U.S. health care reform — Medicare for all, single-payer, and the public option. The Milbank Quarterly, 97(4), 939-953.
Stuart, P. (2018). U.S. debt: The next financial crisis? Journal of Economics Finance and International Business, 2(1), 72-83. Web.
U.S. National Debt Clock: Real Time. (2021). Web.
Wang, Z., & Zeng, J. (2020). From economic cooperation to strategic competition: Understanding the US-China trade disputes through the transformed relations. Journal of Chinese Political Science, 25(1), 49-69.
Woolhandler, S., & Himmelstein, D. U. (2019). Single-payer reform — “Medicare for All”. JAMA, 321(24), 2399-2400. doi:10.1001/jama.2019.7031
Yared, P. (2019). Rising government debt: Causes and solutions for a decades-old trend. Journal of Economic Perspectives, 33(2), 115-140. doi: 10.1257/jep.33.2.115