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Korobov: Debt danger

BY MICHAEL KOROBOV | APRIL 17, 2015 5:00 AM

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The Congressional Budget Office recently released its Monthly Budget Review for March. The results showed that the federal government has taxed more and spent more during the beginning of fiscal 2015 compared with 2014. The deficit has expanded this year by $16 billion.

Almost all politicians advocate for a government that “lives within its means.” The perceived concern for this issue, however, is perhaps the most egregious deception in modern American politics. The failure to address the astronomically rising debt shows that our representatives have genuinely been incapable or unwilling to look out for the country’s long-term interests. 

Sometimes the lies are so blaring that it’s cringe-worthy. In July 2008, then-Sen. Barack Obama claimed that by adding $4 trillion to the debt, Bush was acting irresponsibly and “unpatriotic.”

During his six years, Obama has increased the debt by more than 70 percent from when he first took office, more than the combined total of every other president before him. To make matters worse, the government annually identifies hundreds of billions of dollars of waste, fraud, and abuse in its own spending. The national debt now sits at more than $18 trillion.

Just as we know that the only way to get students to attend an event is by offering free food, it’s much easier for politicians to gain public support by offering free goodies. President Obama, for example, wants to give everyone health insurance, preschool at no cost, free college education, and other fun gifts. At face value, all of these sound great. Does the debt even matter? If our representatives don’t take the debt seriously, should we support these kind of programs regardless of cost?

Economic research shows that the national debt does matter, or at least it should matter quite a bit to college students because it plays a significant factor in the quality of life we will have after graduation. 

As we graduate, the next pages in our lives will deal with obtaining credit cards, mortgaging our first home, financing our first car, and paying back student loans. All of these steps will deal with what the interest rate is at that point in time. When it’s high, that means we will have to pay more.

Foreign investors fund more than 50 percent of our debt, and we depend on their purchases of U.S. Treasury bonds. This gives foreign nations the power to demand higher interest rates (more return for giving us money). Because the Treasury bond rate is used as a benchmark, we will see interest rates rise across the board.

Securing a job is also typically a primary concern for college graduates. The Heritage Foundation estimates that economic growth will fall by about a fourth solely due to overhanging debt if it consumes 90 percent of the GDP. Current projections estimate this moment occurring on or before 2046. Sen. Rand Paul claims that “some economists say that we’re losing a million jobs a year just because of the burden of our debt.” The government will also have to tax us more to make up for the higher interest payments that they are making.

Higher interest rates, increased taxes, unemployment, and economic stagnation because of an enormous debt are already affecting our economy. Economists predict that these factors will get much worse unless radical changes are made to our country’s addition to deficits. Controlling the debt must be a core issue for student voters in this coming presidential election. We must select candidates who are serious about solving this plague that has been created by older generations and placed in our hands.


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