• Large Future Deficits
• Demographics
• Future Costs
• Macroeconomic Problems
• Slow Economic Growth
• Generational Accounting
• Increased Interest on Debt
• Capital Flight
• Economic Solutions
• Social Security
• Medicare
• Discretionary Spending
• Taxes
• Political Limitations
• Ideological Difference
• Partisan Politics
• Public Awareness
• Deficit Politics
• Entitlement Spending
• Policy Recommendations
• Complete Recommendation


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Slow Economic Growth

If the U.S. federal government fails to initiate deficit reform that will lower future deficits, America’s long-term economic growth will be slowed.  Growing federal deficits will siphon off vital, productive private savings, lowering our national savings.  Decreased national savings will lead to higher interest rates which will have two principal impacts. First, higher rates increase the costs of borrowing money and diminish the profitability of new investments.  Since investment is an integral part of GDP growth, the United States’ economy as whole will slow down. 

The second adverse effect of higher interest rates involves the increased amount of money paid to foreigners on their American investment and the inefficiency of governmental investment spending.  Foreign investment in America is not bad if the money goes toward funding productive government investments.  However, the budget clearly indicates that we spend foreign investments on less productive entitlement programs and not on subsidies for education, infrastructure, etc.  Thus, we are inhibiting the long-run growth of the economy by enlarging the federal deficit through increased payments on the interest on foreign debt. At the same time we are not achieving significant benefits from our governmental investments.