Essay/Term paper: The debt: an economic catastrophe

Essay, term paper, research paper:  Economics

The Debt: An Economic Catastrophe

Few national economic issues have generated the same kind of concern as has the
federal debt problem of Canada. There is a pressing need for long-term policies
to lift Canada out of the national debt hole it is in. Eliminating the debt
will not only free up money being spent on interest and reduce taxes, but make
Canada a more feasible place for future generations to live and work.

Interest on the debt has eroded the government's ability to fund its own
operations and essential social services. Presently, thirty-five cents of every
tax dollar the federal government raises is used for interest payments alone on
the debt. Though there have been operating surpluses within the federal
government, they have been eaten up by the debt interest payments. Few people
understand the devastating effects of compound interest. The debt, at a
compound rate of 10%, doubles in seven years, quadruples in fourteen years, and
is eight times as much in twenty-one years. This creates great difficulty for
governments to slow the debt, much less eliminate it. Our federal debt grows
all by itself to the tune of approximately ninety million dollars every day.
This may seem hard to digest, but it is reality. The need for debt elimination
is vital if Canada wants to free up billions of dollars being spend on interest
payments. Two approaches may be taken to this. First, an increase in
government revenues through higher taxation may be considered. However, taxes
are already at a point where some people feel they are working merely to pay the
government, rather than support themselves. Second, a restraint on government
spending by means of cutbacks may be a path, possibly a difficult one, to the
road of eliminating our federal debt. Either way, it will be the young citizens
of Canada that will have to pay for previous government overspending. "Our
national debt, after all, is an internal debt, owed not only by the nation but
to the nation. If our children have to pay the interest, they will pay that
interest to themselves." (Franklin Delano Roosevelt)

As our debt continues to increase, so do the taxes that Canadians are paying.
Thirty-five percent of our taxes are being paid to reduce the debt, leaving the
rest to fund government programs such as health care, education, and job
creation. "For every benefit you receive a tax is levied." (Ralph Waldo
Emerson) However, a long look must be taken at how the tax dollar is
distributed to various programs to determine which ones need more funding, and
which should be receiving less. There is, by no means, excess money to spend
foolishly; that is what got Canada into the financial crisis it remains in today.
But by restricting the growth of program payments, eliminating some programs
and cutting back on others, and by having higher income individuals pay back a
greater share, dollars are now being reassigned to the most essential programs
and to needy Canadians. The battle to reduce tax waste and increase efficiency
continues across all government departments. Nevertheless, Canadians now claim
they are being taxed to death. And the only way to stop this excessive taxation
is for the government and citizens to work together to fight the debt, and
subsequently, less tax dollars will be needed to pull Canada out of the
financial crisis it is in.

There is no doubt that a debt-free country would be the greatest place in the
world to live and work. There would be adequate funding for job creation by
means of public and private investment, tax dollars would be spent responsibly
and wisely, resulting in tax relief but still receiving essential services, and
social spending would be prioritized to ensure the long-term survival of social
programs that Canadians value and need. However, the position Canada is in now
greatly differs from this. Canadians are out of work. Our government spends
too much, owes too much, and taxes too much. This vicious cycle drains the
lifeblood out of the economy, scares away private investors who create jobs, and
makes Canadian products less competitive. Taxes are too high. Government over-
spending has led to enormous interest payments on the debt, driving up the tax
burden on individual Canadians. And finally, our health care system is in
critical condition. Out-of-control government spending is the greatest single
threat to health care and other social programs in Canada. As one can see, the
debt-free scenario is much more attractive. This would unquestionably draw more
people to Canada to live, raise families, and work, consequently stimulating the
federal economy.

The journey to a debt-free Canada will not be a short one. Nonetheless,
measures must be taken to eliminate this economic catastrophe before it gets
more out of hand than it already is. We must learn to live within our means,
and understand that we can no longer spend money we do not have. "Some debts
are fun when you are acquiring them, but none are fun when you set about
retiring them." (Ogden Nash)

Bibliography

Emerson, Ralph Waldo. Quotation Homepage: http:\www.lexmark.com/data/quote-
21.html. Nash, Ogden. Quotation Homepage: http:\www.lexmark.com/data/quote-
21.html. Roosevelt, Franklin Delano. Quotation Homepage:
http:\www.lexmark.com/data/quote-21.html.