PF Jan 2019 - Reducing Federal Debt vs Economic Growth - Introduction

Resolved: The United States federal government should prioritize reducing the federal debt over promoting economic growth.

Introduction

For those of you who have paid attention to any discussion surrounding the economic performance of the United States, you are probably already aware there is a great deal of controversy related to the size of the national debt. I would guess most of you understand being in debt means something is owed. I borrow money from you and you expect me to pay it back. While I delay paying you I am considered in debt to you. Likewise, federal debt is money the federal government borrows and is expected to pay back. I assume most of you can surmise some kind of basic understanding of economic growth as being an increase in wealth or something related to increasing wealth. Furthermore, maybe you can surmise that debt and economic growth can both coexist and not necessary be related. I mean, I could borrow money from you while I continue to earn more and more income and unless I decide to use some of my wealth to pay off some of my debt, they both continue to exist and one is not necessarily affected by the other. Well, maybe one is not affected by the other. I mean, at some point, perhaps the level of my indebtedness begins to impact my ability to increase my wealth. Suppose when I borrow your money you were using your money to make more money so when I borrow it you lose that potential additional income. You may expect me to pay back what I borrowed plus a little more to make up for the additional money you would lose. Moreover, you decide I want you to start paying me back immediately, by making periodic payments until the debt is paid back including the extra. In the financial world, the money I borrow is the principal amount. The additional amount I have to pay back is the interest and while the principal amount remains constant (assuming I do not borrow more), the interest amount can potentially build over time and if I don't pay the interest or the principal or both according to our agreement, my debt will increase and this is where things start to get complicated. While looking at debt, consider one more important thing. Suppose I ask to borrow money from you. You may realize there is a certain amount risk I will not pay you back in a timely way or perhaps not at all. I may miss a payment and so you as the lender, assess that risk (usually based on my past performance in paying back debts) and adjust the amount of interest based upon the risk such that the higher the risk, the higher the interest you will charge for the loan.

Of course, at the other end of the resolution we have economic growth. Continuing with this overly simplistic explanation, suppose I own a small business that produces widgets. The widgets sell pretty well, so each widget I produce potentially increases my wealth. If I can expand my ability to produce more widgets, the business grows meaning my potential to gain income increases for as long as I can continue to sell widgets. I may even decide to borrow money, that is go into debt, in order to expand my business. I need to consider that growing the business increases my wealth but borrowing money decreases my wealth because I need to pay it back with interest. On top of that, the government forces me to pay a percentage of the money I make to taxes which decreases my income. Of course, I can offset the loss by increasing the price but then I may sell fewer widgets and so a certain balance needs to be struck between tax rates, prices and debt.

These examples are only intended to introduce some concepts and terminology and function on a very small scale compared to the size of the debt and growth numbers the U.S. government is managing. Also, we need to bear in mind that the government is not a business so economic growth would be more of an accumulation of all (aggregate) the producers of goods and services in the U.S. combined. The government collects taxes from these producers and so, potentially when growth occurs, the income the government receives through taxes also increases. But because the government is not a business, it does not make a profit. The money it takes in is given back to pay for things like the national defense, federal highways, government administration, social welfare programs and many, many other things which potentially affects the ability of businesses to expand and increase wealth. When the amount of money the government pays out for its many services exceeds the income it produces from taxes (and other sources), the government goes into debt, that is it borrows money, to continue providing the services it is pledged to provide. At this extremely large scale, the interplay between tax rates, growth, debt, services, etc playing out in a world intertwined with linking economies with other nations, is so complex there are various economic theories which try to explain how one aspect affects the other and provides some insight what effect things like growth and debt have on the economy and on the lives of citizens. But before we can focus more specifically on this resolution and begin to examine why the resolution demands the government to prioritize one aspect of the federal economy over another, we need to define some terms.

Definitions

The United States federal government (USFG)

For this definition, I refer to the online source, USLegal:

The United States Federal Government is established by the US Constitution. The Federal Government shares sovereignty over the United Sates with the individual governments of the States of US. The Federal government has three branches: i) the legislature, which is the US Congress, ii) Executive, comprised of the President and Vice president of the US and iii) Judiciary. The US Constitution prescribes a system of separation of powers and ‘checks and balances’ for the smooth functioning of all the three branches of the Federal Government. The US Constitution limits the powers of the Federal Government to the powers assigned to it; all powers not expressly assigned to the Federal Government are reserved to the States or to the people.

The definition is provided to serve several purposes. It defines the scope of the resolution as being limited to the United States and focuses on the federal government as opposed to state and local governments which also impact the national economy to a certain degree.

prioritize

Intuitively, to prioritize means to order by priority so to avoid the redundancy we look to the Cambridge English Dictionary, "to arrange in order of importance so that you can deal with the most important things before the others".

reducing (to reduce)

Let's stay with the Cambridge dictionary: "to make something less in size, amount, degree, importance, or price".

federal debt

The following definition is given by Investopedia:

First, it's important to understand what the difference is between the federal government's annual budget deficit (or fiscal deficit) and the outstanding federal debt (or the national public debt, the official accounting term). Simply explained, the federal government generates a budget deficit whenever it spends more money than it brings in through income-generating activities such as individual, corporate or excise taxes. In order to operate in this manner, the Treasury Department has to issue treasury bills, treasury notes and treasury bonds to compensate for the difference: financing its deficit by borrowing from the public (which includes both domestic and foreign investors, as well as corporations and other governments), in other words. By issuing these types of securities, the federal government can acquire the cash that it needs to provide governmental services. The federal or national debt is simply the net accumulation of the federal government's annual budget deficits: It is the total amount of money that the U.S. federal government owes to its creditors.

promoting

The Cambridge English Dictionary provides a useful definition: "to encourage people to like, buy, use, do, or support something".

economic growth

The following definition is from Investopedia :

Economic growth is an increase in the capacity of an economy to produce goods and services, compared from one period of time to another. It can be measured in nominal or real terms, the latter of which is adjusted for inflation. Traditionally, aggregate economic growth is measured in terms of gross national product (GNP) or gross domestic product (GDP), although alternative metrics are sometimes used.

Topic Analysis

This resolution, in effect, directs USFG policy toward placing more importance upon decreasing the national debt than encouraging economic growth, which, by definition, is increasing the GDP. Initially, we surmise, the USFG is not currently prioritizing the reduction of the federal debt with respect to promotion of growth but we can reasonably ask ourselves, how do we know that is true? It may not be legitimate to note, the federal debt is high and continues to increase so therefore the USFG is not prioritizing its reduction when in fact it may be an issue of extreme importance to which the USFG has applied a lot of energy into reducing but the actions they are taking are simply not doing the job. And so we need to understand or define how that prioritization or lack thereof, is measured. 

We assume, the resolution does not define a zero-sum game. By that, I mean, we assume the USFG can both focus upon debt reduction and economic growth at the same time. It is not a situation where it can be one or the other but not both. The resolution seems to imply the USFG can prioritize debt reduction while encouraging economic growth but again it raises the concern about how to measure the level of promotion of economic growth? Do we care to provide a weighing mechanism that gives us some means of quantitatively weighing the the two objectives with respect to one another? Frankly, at this stage of my analysis, not being an economist, I am not even sure if that is possible. Even more importantly, because this is Public Forum debate we need to be acutely aware that our judges are also unlikely to be economists and so we must deal with this complex topic in a fairly straightforward and simple way within the time constraints the debate demands and this will no doubt be frustrating for debaters who commit weeks to researching and are forced to "dumb it down" to the level a judge who's understanding of federal economics may be as simple as the introduction I provided above.

I would suggest the best approach to finding a common mechanism the judge can understand is to focus on the impacts of federal debt versus economic growth. The analysis will likely come down to dollar and cents, something most judges can easily comprehend as long as the framework is directed toward the judge's wallet. This is key. How does the prioritization of one or the other of these complex elements of the national economy affect my pitiful savings account, or my ability to buy a house or feed my family, or pay for my child's college education? This is what "public" forum is meant to be, in my opinion. It is a debate about how these issues affect the average person and while some judges are impressed by lots of complex statistics and large numbers and spewing tons of cards, and the impression that debaters can be very knowledgeable; these factors are merely decorations on the gut-level impacts which can win a judge's ballot.

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