Since Congress convened in January, no issue has dominated the national discussion and congressional debate more than spending and the deficit. From tea party patriots to President Obama, there is now nearly unanimous agreement that government spending is out of control.
The time and attention finally being paid to this issue is long overdue. Over the past three years, the United States has added $5 trillion to our national debt, bringing the total to $14.3 trillion. With nearly 42 cents of every dollar spent by the federal government being financed, we are borrowing trillions each year to feed our spending addiction. Perhaps the most sobering fact is that after July 27, every cent the government spends through the rest of the year will be borrowed.
While the debate in Washington on the size and types of cuts has been vigorous and at times tense, it has failed to focus on the harm out-of-control deficit spending has caused and will continue to cause among private-sector job creators. In order for new companies to start up or existing companies to grow, certain elements are essential. Three of the most important are availability of capital, economic confidence and predictability of future costs. Deficit spending at the levels we have seen over the last three years has undermined all three.
Of all the elements, access to capital is the most essential. Like a car loan or student loan, when the government borrows money, it has to make regular payments or risk default. The difference is that government has someone else to pick up the tab: the taxpayers. Last year, interest payments on the national debt totaled $414 billion. This constitutes nearly 3 percent of GDP, the entire economic output of the United States. This cash is not being invested and is inaccessible to small businesses wishing to grow and expand. Instead, it is being sent to foreign lenders, with China as the largest holder.
As the deficit grows, so will this drain on the economy. Massive debt also reduces the available capital because as our national debt explodes, lenders lose confidence in our ability to make interest payments on time. As Greece and Portugal learned last year, this leads to lower credit ratings, which make loans even more expensive for U.S. taxpayers. The deficit-driven spending cycle continues.
Lenders are not the only ones losing confidence in America's fiscal health. A key economic barometer is consumer confidence. When you and I feel that our nation is on firm financial footing, we are more likely to buy a car, replace an old refrigerator or try out the newest smart phone. The same is true for employers. If we expect businesses to buy new equipment, open a new office or, most importantly, hire a new employee, they must have confidence in the economy and the government's fiscal stability.
Employer confidence is linked closely with the final factor: predictability of future costs. Chief among costs are labor, taxes and regulation. Having a clear understanding of what these costs will be tomorrow allows employers to expand and hire new employees today. Rather than begin hiring, many companies are still waiting on the sidelines because of continued uncertainty about future tax rates and related costs. For example, I supported the repeal of the onerous IRS reporting requirements placed on small businesses under the health care law. This provision was expected to cost millions in lost productivity as well as countless jobs. Less spending means a smaller, leaner government that taxes less and regulates smarter, giving companies a clearer picture of the cost of doing business.
While cutting federal government spending is important, it is not the ultimate end. Responsible government creates the environment in which the economy can grow and businesses create jobs. Spending cuts are essential but not a cure-all for our economic malaise. Washington must get out of the way; the most important role in job creation is played by entrepreneurs. Employers, small and large alike, cannot lose sight of the resilience of the American workforce. We must all do our part to get Americans back to work.
Republican Congressman Michael Fitzpatrick represents Pennsylvania's 8th District, comprising all of Bucks County and small parts of Montgomery County and Philadelphia.