How will the U.S. government at all levels reduce debt and deficits?

In various levels of government, how to reduce debt and fiscal deficits is a pressing issue that urgently requires bipartisan consensus. Current fiscal policies have become unsustainable, with the bloated federal government and excessive local and state government units developing a habit of spending far beyond what tax revenues can cover.

The national debt in Washington D.C. has already reached $36 trillion, with Congress seemingly addicted to spending money that does not belong to them. These deficits far exceed the United States’ Gross Domestic Product (GDP), plunging us into a perilous financial territory. Maintaining sound finances becomes incredibly challenging when the ratio of debt to GDP becomes imbalanced.

For years, California has been plagued by this vice, accumulating massive debts and facing budget deficits annually. Excessive spending mainly stems from misplaced policy priorities and redundant services of overlapping institutions, leading some counties and municipalities to the brink of bankruptcy.

The Santa Ana Unified School District (SAUSD) in Southern California is a prime example of mismanaged funds, recently highlighted in an article in the Orange County Register.

SAUSD is currently facing a $180 million deficit, forcing it to lay off nearly 300 teachers and staff members. Can the district expect to receive the same funding as six or seven years ago after losing 11,000 students? Significant cuts must be made as the district has shrunk by nearly 25%.

If the district had taken into account the declining annual enrollment and not excessively relied on COVID-19 funds, this deficit might have been avoided. Should the district fail to straighten out its finances, the Orange County Department of Education may take over its financial management.

Thirty years ago, in December 1994, Orange County experienced the largest municipal bankruptcy in U.S. history due to risky, high-volatility derivative investments funded by tax revenues, amounting to a staggering $1.7 billion bankruptcy.

At that time, the tax collector and treasurer, Robert Citro, aimed to boost county revenues without raising taxes. However, when interest rates spiked, funds plummeted drastically, ultimately leading to bankruptcy. Journalist John Moorlach assisted in achieving financial stability during this process, lasting several months. Risky investments and irresponsible spending are disasters for any governing body.

At the federal level, there are solutions to address ongoing deficits. Currently, like other indebted nations, the U.S. urgently needs shock therapy to march towards budget balance.

Firstly, the government must ensure that expenses do not exceed income. This also entails streamlining some “sacred cows” institutions to their basic size and avoiding redundancy with other agencies. Numerous federal departments are bogged down by bureaucratic obstacles and tedious paperwork.

Next, some federal departments can be streamlined or even abolished. For instance, the Department of Agriculture, Department of Education, Department of Energy, Department of Health and Human Services (HHS), Department of Housing and Urban Development (HUD), and Department of Labor could be handled by state governments for more efficiency. Moreover, aid funds might vanish into abuse, fraud, and waste unless comprehensive reviews by both parties are conducted.

The founding fathers of the U.S. aimed to limit federal government power. They believed that the federal government’s primary functions should be enforcing laws, managing commerce, handling international relations, and defense, responsibilities now held by the Departments of Justice, Commerce, State, and Defense. Other matters should be left to local or state governments or the private sector.

To reduce deficits and address national debt issues, relaxing regulations and tax reforms should take precedence. Reducing regulations and cutting taxes for businesses and individuals can spur economic innovation and prosperity, thereby boosting GDP and lowering unemployment rates. Near full employment would mean reduced demand for social services like food stamps, housing subsidies, and welfare.

The U.S. should reimpose tariffs on goods and services, especially for countries that dump cheap products and steal intellectual property. Before the existence of the Internal Revenue Service (IRS) in 1913, government revenues primarily came from tariffs on commodities. Tariffs may raise prices for some products, but this could be offset by lowering costs for other goods. Additionally, shifting trade from China to countries complying with fair trade rules could help the U.S. transition from trade deficits to surpluses.

Actions taken at the federal level can be replicated at local and state levels to address debt issues. If states and local governments accumulate substantial deficits, they should focus on core government tasks. For example, California should prioritize firefighting, water resources, and public safety rather than high-speed trains, homelessness issues, and lawless immigrant services.

Reducing debt, establishing correct fiscal priorities, and utilizing taxpayer funds wisely will lead to a stronger economy and national security. This can potentially save taxpayers hundreds of billions or even trillions of dollars.

This article presents the author’s personal opinions and does not necessarily reflect the stance of the Epoch Times. ◇