Opinion Return to Article Lower the Debt Ceiling
Anton Wahlman, Contributor
07/08/11 – 07:20 AM EDT
NEW YORK (TheStreet) — Yes, you read that right. Not increase it. Not keep it where it is. Lower it. Let me tell you why this is not only feasible, but also desirable.
We are constantly told that we need to go back to the much-better federal government budgets of the mid-to-late 1990s. I’m all for it! Doing just that would indeed enable us to lower the debt ceiling immediately.
Here are the basic facts: Today, federal tax revenue is running at approximately $2.4 trillion. In 1997, Federal spending was $1.6 trillion, which included paying interest on the debt. All we need now is to keep our current tax revenue the same, while adopting the level of government spending that we had in the middle of the universally beloved Clinton-Gingrich years.
With tax revenue of $2.4 trillion and spending of $1.6 trillion, we could lower the debt ceiling by $800 billion per year. Assuming no economic growth, it would then take us approximately 15 years to pay off the federal debt. We would be back to the fiscally sound and prosperous days of the Calvin Coolidge administration.
By stopping the bleeding at the Clinton-Gingrich 1997 level, the debt ceiling could go from $14.4 trillion to $13.6 trillion by 2012, then $12.8 trillion by 2013, $12.0 trillion by 2014, and so forth. This would lower long-term interest rates, encouraging investment and economic growth. GDP would likely grow at a rate a lot closer to China’s current 10% to 12% than our current 2%. Unemployment would go to zero almost overnight, and tax revenue would probably skyrocket well beyond the current $2.4 trillion level.
Did anyone argue in 1997 that the federal government was too small? Not even Bill Clinton did that, as he