National debt proves to be economically perilous

Everyone knows that the average college student owes about $23,000 by graduation. Less well-known is the fact that if the national debt was evenly divided among America’s 314 million citizens, each would owe more than $51,000, well over the average person’s yearly salary. Last month, the Treasury Department announced that the national debt surpassed $16 trillion for the first time in history. This is not just an arbitrary number, it is one that has direct implications for our economic future. A good way to measure the debt is to compare it to the country’s GDP, or its economic output in one year. If the debt gets too high compared to what the economy produces, it can become overwhelming. Members of the European Union attempt (though often to no avail) to keep their total debt below 60 percent of their GDP. The Wall Street Journal’s editorial board points out “that most economists consider the general boundary between safety and crisis” to be debt that is greater than 90 percent of GDP. According to the Congressional budget Office, U.S. debt will surpass 70 percent of GDP by the end of the year and, at current rates, will be around 100 percent in just a few years. Put simply, the greater the debt, the greater the chance of defaulting on our loans in a situation similar to what Greece has been experiencing.  President Obama has overseen a tremendous increase in government spending during the last four years. Each year of Obama’s term has seen the government spend over one trillion dollars more than it takes in. Julie Cradshaw of Moneynews points out that President Bush increased the debt by two trillion over eight years (a lot of money by any account), but that Obama has increased the debt by $5.3 trillion in only four years. Obama claims that the expenditure is needed to keep the economy going. However, David Malpass, president of Encima Global and former Chief Economist of Bear Stearns, points out that the Obama administration “has implemented more fiscal stimulus and monetary intervention than ever before, yet real [gross domestic product] has slowed from 2.4 percent in 2010 to 2 percent in 2011, and to only 1.6 percent in the first half of 2012.”

This irresponsible spending has not only failed to produce a recovery, but is actively hampering long-term economic prospects. Just last year, Standard and Poor’s, one of three major credit rating agencies, downgraded the safety of U.S. debt for the first time in history. That sent the message that it is increasingly risky to loan money to the U.S. and made it more difficult for the U.S. to take on additional debt. In their report, S&P pointed out that “elected officials remain wary of tackling the structural issues required to effectively address the rising U.S. public debt burden.”

Just last month, Moody’s, one of the other major credit rating agencies, warned “that it likely would downgrade the U.S. AAA credit rating if government officials don’t deal with the nation’s debt problems,” according to Jim Puzzanghera of the LA Times. For his part, Obama seems content to oppose any serious attempt at reducing government spending and to attack Republicans for wanting to reform entitlement programs like Social Security and Medicare. While deluding voters with promises of “free” programs and no changes in entitlement benefits may be good politics, the facts show that substantive reforms are needed now to avoid a more catastrophic outcome later. The Wall Street Journal admits that Republicans’ reforms may be significant, “but that’s because they’re commensurate with the magnitude of the fiscal problem.”

In a hearing before the House Budget Committee last February, an enlightening exchange took place between Obama’s Treasury secretary Timothy Geithner and Rep. Paul Ryan, Romney’s running mate. Speaking for the administration, Geithner stated that “we’re not coming before you to say we have a definitive solution to our long-term problem. What we do know is we don’t like yours.”

Ignoring the debt will not make it go away. Instead of taking serious action to get spending under control, Obama plays on peoples’ fears of cuts now to distract them from the future train wreck. Republicans, on the other hand, have the serious proposals and ideas to begin getting the debt under control and to get the economy turned around.

Story by Maxford Nelsen Columnist

Nelsen is a senior majoring in political science. Comments can be sent to

Corporate profits prove to be conducive to economic growth

Politics aside, political conventions can be rather amusing. People have the capacity to say some pretty outrageous things, and conventions seem to function as a breeding ground for bizarre comments. The Democratic National Convention, which took place at the beginning of the month, was no exception. The main function of the convention was to officially nominate incumbent president Barack Obama as the Democratic Party’s nominee for president.

Posing as an anti-business zealot, radio host Peter Schiff interviewed a number of delegates at the convention about corporate profits. In a video posted on YouTube, Schiff speaks with seven delegates who call for an outright ban on corporate profitability. Six more express support for a federal cap on how much money corporations can earn. Bear in mind these are not “Occupy” protesters, but leaders of the Democratic Party.

Despite the enthusiasm of these delegates in favor of corporate poverty, there is no economy without profit. For whatever reason, it has become popular to despise the wealthy and successful. There seems to be a false assumption that the economy is a zero-sum game, or that the rich are only rich because the poor are poor.

Basically, there are two ways a company can use profit. First, it could use the money to expand, which provides goods or services to more people, causes the company to spend more in other areas in the economy, and allows the company to hire more staff and create new jobs.

Second, if the company chooses to save the money, that money is made available to other businesses in the form of loans or investments, allowing them to expand their operations or develop new products.

One way or another, that profit is not only good for the individual company, but for the economy overall.

If the company isn’t turning a profit, how can it afford to hire new employees and create new jobs? Without profit, the company can’t afford the investment necessary to design that new phone, that new car or that new anything.

The very potential to make money is what drives people to work hard. It is certainly easy to criticize supposed greed in people wealthier than ourselves. But let’s face it: no one would go to work if there wasn’t a paycheck involved, and if the company isn’t making any money, neither are you. Without profit, there is no motivation for innovation or hard work, and economic growth collapses.

Of course, if the government is taking corporate profits and giving them to us, that’s a pretty sweet deal, right? Don’t we deserve it? Absolutely not. Companies make money because they sell things that people want. They have earned the right to their profits because consumers benefit from their products or services and voluntarily choose to spend money on them.

Advocates of forcibly taking earned profit from companies or individuals and giving it away to those who have not earned it need to examine themselves before saying anything about greed.

Greed aside, it is simply immoral for the government to determine how much success is allowed. People may like government intervention when it benefits us (think the minimum wage), but how would you like it if the government set a limit on how much you could earn?

With the economy already in shambles, banning profit is the last thing we need. The fact that Democratic convention-goers thought this was a good idea is almost comical, if it weren’t so serious.

Max Nelsen Columnist

Nelsen  is a senior majoring in political science. Comments can be sent to