SAN JOSE, CALIF.— The U.S. hit its debt limit on Jan.19 and Congress and lawmakers have been fighting over the options they have to circumvent the limit for as long as possible, but what can they do to deal with America’s massive debt?
One of the most extreme options and possibly the only way for the U.S. to get rid of its debt is by defaulting on its $31.5 trillion. This would have catastrophic effects as the debt is a considerable percentage of the world’s total Gross Domestic Product (GDP) of around $100 trillion and would cause a recession many orders of magnitude worse than the current COVID recession.
Why hasn’t Congress lifted the debt ceiling like before? Although Congress is likely to increase the debt ceiling as usual, increasing the debt limit is only a means to an end to pay off its current debt which would have an effect of decreasing the total budget that the U.S. Treasury has.
Another plan that Congress proposed is budget cuts to many of the federally funded programs, but this is unlikely as both political parties refuse to vote to cut their own programs and funding.
But the harsh reality is that even if the U.S. relieves its contracts and cuts the entire military budget of $800 billion and several other major programs, it still can’t pay off the massive amounts it borrows every year to pay back its original debt.
My proposition is to have the U.S. sail just below the debt limit for as long as it can, just like how it’s doing now but with cuts to some of the federally funded programs like Medicare, Medicaid and Income tax because of the huge embezzlement problem and to increase and revamp taxes, like raising the national sales tax to 10% for a brief period and to revamp the tax code. All of these could save over $1.5 trillion dollars which still doesn’t have a significant impact on the debt, this should signify on how huge the debt has gotten over the years. Even then both sides of the American political system in Congress are hesitant to do any of my propositions as it’s a conflict of interests between both parties and themselves.
But what would happen to everyone living in the states if the U.S. does nothing about the debt and defaults on it? The Federal government wouldn’t have enough money to run which would lead to the shutdown of governmental services, federal public programs, stipends paid for those in need, public health services would also shut down like medicare, and a lot of other programs mainly public welfare would be shut down. This complete governmental collapse would affect everyone especially in major urban areas Silicon Valley, where most major tech companies here are subsidized by governmental projects increasing the already high layoff rates and skyrocketing unemployment rates. Most people who struggle to pay the already high cost of living and rely on government subsidies would be homeless.
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