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please think about it. Over the past year the national debt has increased by $2.5 trillion. This works out to a staggering $78,401 per second. U.S. federal borrowing in fiscal year 2023 approached 9% of the economy.
These numbers should frighten all Americans.
As Vice-Chairman of the Joint Economic Committee, I feel that I must address an alarming issue. Increase in national debt. If we fail to confront this issue head-on, future generations will face the devastating prospect of total top marginal tax rates of 100% to pay for existing government services .
We have a bipartisan debt commission focused on finding innovative solutions to address this dangerous threat and ensure our children and grandchildren have the same opportunities we have. By founding the , we had the opportunity to unite to save the republic. I commend House Speaker Mike Johnson (R-Louisiana) for pledging to establish a debt commission as one of his first acts after his election.
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Our main fiscal challenges stem from demographic trends. The ratio of workers to retirees has fallen from more than 5:1 to less than 3:1. At the same time, one in nine prime-age men is not in the labor force.
These trends are placing enormous strain on the Social Security and Medicare programs that America’s retirees rightfully rely on. Simply put, we must fulfill our commitments to them. At the same time, it is morally indefensible to ask Americans to pay massive tax increases to keep these programs afloat.
So instead of focusing on who should pay, I think we should focus on why health care costs have increased so rapidly.
Consider that obesity is a major contributor to health care costs for conditions ranging from diabetes to heart disease. The 2023 Joint Economic Report estimates that untreated obesity will cost taxpayers $4.1 trillion over the next 10 years.
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Expectations are high for the new role of medicines targeting severe obesity and its complications. Ensuring access to effective treatments can help address the root causes of these health problems and reduce financial pressure on federal health spending.
Investment in research and development is essential to continue making medical advances that improve quality of life, reduce costs, and improve outcomes.
But even a forward-looking approach to health care cannot ignore the pressing financial challenges facing Social Security and Medicare. Without legislative intervention, these programs will face automatic and severe cuts that no American wants.
In just 10 years, the Social Security Trust Fund will be depleted. If that happens, federal law would require an automatic 25% cut in Social Security benefits along with cuts to Medicare spending.
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As a nation, it is incumbent on us to find bipartisan solutions that solidify fiscal stability.
Another pressing concern is the historically low liquidity in the U.S. Treasury market. As the country prepares to issue $1.8 trillion in new debt in fiscal year 2024, it needs to be aware of the risks posed by this illiquidity.
As the current yield on the 10-year Treasury note is 4.6%, a slight decrease in demand for Treasuries could cause interest rates to rise significantly. That’s nearly a full point higher than the Congressional Budget Office’s projections at the beginning of the year. .
Rising interest rates could trigger a dangerous cycle of slower economic growth and higher federal deficits, which together would worsen the debt crisis.
We need to consider innovative approaches to raising debt while preserving liquidity.
One approach, as proposed by Hoover Institution economist John Cochran, is for the Treasury to issue perpetual bonds. These products are highly liquid, locking in long-term funding costs for governments and providing stability and predictability to the market.
of federal reserve Adopting rules-based monetary policy could also improve liquidity in government bond markets, thereby reducing interest rate volatility.
The dramatic increase in America’s national debt is a crisis that can no longer be ignored. This is a challenge that threatens our future prosperity, and Congress must rise up before it’s too late.
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By forming a bipartisan debt commission, we have a unique opportunity to come together and address this issue directly. Regardless of our political affiliation, we all want a healthier population, strong and secure social safety net programs, and a strong and prosperous economy.
The time for us to act is now.
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