At an all-time high of $16 trillion, the national debt remains a central challenge to bringing about the sustainable economic recovery America needs. Extreme government debt poses significant threats to long-term economic growth, which is critical to putting Americans back to work.
As our country's debt grows, so do interest payments -- an obligation that requires more tax dollars. These funds are then unavailable for families to meet household needs and job creators to expand and hire.
A Debilitating Debt-to-GDP Ratio
Particularly troubling is the fact that the size of the federal debt is now greater than the U.S. economy. America's total debt load has surpassed gross domestic product (GDP), which is an important indicator representing the dollar value of all the goods and services that our economy produces in a year.
The work of economists Carmen Reinhart and Kenneth Rogoff helps illustrate the lasting harm of high government debt. Their study of public debt in 44 countries revealed that debt levels exceeding 90 percent of GDP are associated with lower economic growth -- declining by about 1 percent annually.
Without robust economic growth, solving the debt problem becomes even more difficult. Government revenues decrease, which leads to more borrowing and ultimately more debt.
Encouraging economic growth is important to job creation. Unfortunately, based on the latest estimate from the Commerce Department, America's GDP growth is limping along at an anemic 1.7 percent, and the nonpartisan Congressional Budget Office (CBO) forecasts that the sluggish rates are not likely to change soon. The CBO's most recent economic outlook predicts another recession if Congress does not prevent the drastic tax hikes and severe budget sequestration set to go into effect in early January.
Downgrade Reflects Loss of Confidence
We have already witnessed the harmful consequences of not addressing America's debt crisis. Last year, the ratings firm Standard & Poor's downgraded our perfect national credit rating for the first time in U.S. history. The wake-up call was clear: Until measures for sensible deficit reduction are put in place, investors have a reason to doubt America's fiscal solvency.
And yet, the Obama Administration and congressional Democrats continue to ignore the call for real fiscal reform, instead pursuing costly big-government priorities. Runaway federal spending has ballooned deficits, which have not dropped below $1 trillion each year President Obama has been in office.
Solutions to Drive Down Debt and Boost Job Creation
There are a staggering 23 million Americans who do not have job, are underemployed, or have stopped looking for work. According to analysts, the economy needs to grow by at least 2.5 percent a year to lower the unemployment rate, which has remained higher than 8 percent for 43 consecutive months.
Republicans have offered ideas to lower the debt, jumpstart economic growth, and create jobs. Legislation like the Cut, Cap, and Balance Act, which I co-sponsored, would put a permanent check on government spending. Keeping taxes low would help small businesses hire new workers. Unleashing domestic energy production would help protect American families from rising gas prices and high energy costs.
These strategies are good for economic growth and important to bringing down the debt in the long run. Unless current policy is changed, the $16 trillion debt will continue to impede recovery and remain an unfair burden on future generations.