Now, at certain times — particularly during war or recession — our nation has had to borrow money to pay for some of our priorities. And as most families understand, a little credit card debt isn't going to hurt if it's temporary.
But as far back as the 1980s, America started amassing debt at more alarming levels, and our leaders began to realise that a larger challenge was on the horizon. They knew that eventually, the baby boom generation would retire, which meant a much bigger portion of our citizens would be relying on programs like Medicare, Social Security, and possibly Medicaid. Like parents with young children who know they have to start saving for the college years, America had to start borrowing less and saving more to prepare for the retirement of an entire generation.
To meet this challenge, our leaders came together three times during the 1990s to reduce our nation's deficit - three times.
As a result of these bipartisan efforts, America's finances were in great shape by the year 2000. We went from deficit to surplus. America was actually on track to becoming completely debt free, and we were prepared for the retirement of the baby boomers.
But after Democrats and Republicans committed to fiscal discipline during the 1990s, we lost our way in the decade that followed. We increased spending dramatically for two wars and an expensive prescription drug program -but we didn't pay for any of this new spending. To give you an idea of how much damage this caused to our nation's check-book, consider this: In the last decade, if we had simply found a way to pay for the tax cuts and the prescription drug benefit, our deficit would currently be at low historical levels in the coming years.
But that's not what happened. And so, by the time I took office, we once again found ourselves deeply in debt and unprepared for a baby boom retirement that is now starting to take place. When I took office, our projected deficit, annually, was more than $1 trillion. On top of that, we faced a terrible financial crisis and a recession that, like most recessions, led us to temporarily borrow even more.
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So that's how our fiscal challenge was created. That's how we got here. And now that our economic recovery is gaining strength, Democrats and Republicans must come together and restore the fiscal responsibility that served us so well in the 1990s. We have to live within our means. We have to reduce our deficit, and we have to get back on a path that will allow us to pay down our debt. And we have to do it in a way that protects the recovery, protects the investments we need to grow, create jobs, and helps us win the future.
Even after our economy recovers, our government will still be on track to spend more money than it takes in throughout this decade and beyond. That means we'll have to keep borrowing more from countries like China. That means more of your tax dollars each year will go towards paying off the interest on all the loans that we keep taking out. By the end of this decade, the interest that we owe on our debt could rise to nearly $1 trillion. Think about that. That's the interest - just the interest payments.
Here's the good news: That doesn't have to be our future. But that starts by being honest about what's causing our deficit. You see, most Americans tend to dislike government spending in the abstract, but like the stuff that it buys. Most of us, regardless of party affiliation, believe that we should have a strong military and a strong defence. Most Americans believe we should invest in education and medical research. Most Americans think we should protect commitments like Social Security and Medicare. And without even looking at a poll, my finely honed political instincts tell me that almost nobody believes they should be paying higher taxes. (Laughter)
So here's the truth. Around two-thirds of our budget - two-thirds - is spent on Medicare, Medicaid, Social Security, and national security. Two-thirds. Programmes like unemployment insurance, student loans, veterans' benefits, and tax credits for working families take up another 20 per cent. What's left, after interest on the debt, is just 12 per cent for everything else. That's 12 per cent for all of our national priorities - education, clean energy, medical research, transportation, our national parks, food safety, keeping our air and water clean - you name it all of that accounts for 12 per cent of our budget.
Excerpt from US President Barack Obama’s speech at Georgetown University, Washington, April 13