Saturday, July 24, 2010

owe, owe, owe, owe, owe, owe ... owe my gosh!

Sixteen tons and whaddya get?  Another day older and deeper in debt!  Saint Peter, don't ya call me 'cause I can't go ... I owe my soul to the company store [or China in today's interpretation].  This old ballad about the mines is a metaphor for the national debt of the United States. 

Reports from government agencies indicate the federal government will spend over budget in 2010 by a deficit of a staggering $1.47 trillion.  Forecasts project over the next 10 years a slight reduction in deficit spending but I find it curious that our government spends money at an astronomical rate every year, heaping piles of money on a national debt that is skyrocketing past $13 trillion.  When private citizens can't afford to make all the purchases they would like, those citizens are forced to make tough choices about what they will and will not buy.  Our line of credit only goes so far -- and so should the government's. 

For decades, we have piled deficit upon deficit, mortgaging our future and our children's future for the temporary convenience of the present.... You and I, as individuals, can, by borrowing, live beyond our means, but for only a limited period of time. Why, then, should we think that collectively, as a nation, we are not bound by that same limitation?

Ronald Reagan (yes I realize the irony of this but it's a great quote)

Why, some people may ask, is deficit spending so bad?  The first reason is simple.  When costs exceed revenue, another source of income must be found.  In this case, our government sells bonds, securities, etc. to groups, individuals, and notably, foreign entities.  Essentially, the federal government is receiving a loan from someone else to make up for what they can't pay out.  The amount of money the feds pay out on the interest accumulating on our debt in a year is now topping out at around $400 billion.  This dollar amount cuts into the budget every year and continues to grow.

This creates an even bigger problem should any of these debtors come calling for their money due them should they call in their "markers."  China, for instance, currently owns about 10% of our debt.  Should they demand full payment on bonds (and not just the interest), the United States would be left in a very precarious situation.  In such a situation, America would be left with some difficult decisions.  Paying off the debt would require, presumably, the government to print more money.  This nightmare would most likely have a drastic effect on the value of the dollar and a ripple effect would possibly hit Wall Street and other sectors of the economy.  Speaking of the economy, White House Budget Director Peter Orzsag was quoted as stating "the economy is still weaker than we'd like and [there is] a medium-term and long-term fiscal situation that requires attention."  Really?  That's the best he has to offer?  Wow.

Other options exist should China or any other creditor come calling.  We always could default on the loan, so to speak.  Of course, I don't even want to think of the international fiscal, political, and potentially military consequences that would rain down should the unthinkable happen.

One government agency involved in supervising the national debt -- The Bureau of Public Debt -- states on their website, "Public debt is a fact of life."  Why does it have to be?  During Andrew Jackson's tenure as president, he wiped the debt down to lower than $35,000 when he left the White House.  Why can our government not start making the tough decisions to create a budget that works?  I actually know the answer already -- because they're afraid.  Afraid that making tough choices will cause them not to be re-elected.  And I suppose I can understand that in a way.  Those who are in power rarely let go willingly (except Cincinnatus and Washington). 

Many Americans are currently angered by the tax and spend policies of the federal government and subsequently have been involved in a growing "Tea Party Movement."  Some voices are even concerned that we are "moving towards socialism" and it's all President Obama's fault.  Well, guess what?  You're too late.  Your darkest fears came true a long time ago.  And our socialist tendencies are costing us financially and in prestige as a nation. 

The biggest increases in the debt have come through the fighting of wars -- some just causes, others not so much.  Wars cost money and if you want to win, they cost even more money.  The other major contributor to the national debt comes from economic crises.  Starting mainly in the Depression era, the federal government adopted a Keynesian approach to fixing recessions/depressions.  The model promoted a government spending at a deficit as a means of "priming the pump." 

In the instance of the Great Depression, priming the pump meant government assistance in multiple forms -- FDR's alphabet soup programs, including the Federal Emergency Relief Administration (FERA).  While FDR did not intend these programs to be a permanent solution, the United States received its first big taste of socialism.  One of those programs, Social Security, lives on today and thanks in part to "baby boomers," is breaking the bank.

Social programs have slowly crept into American society over the last half century and continue to add to the costs of society.  President Lyndon Johnson's "Great Society" programs spent at a rate that would make FDR blush and many of those programs, including public housing and various welfare programs are still in existence today. 

When you combine Medicare, Medicaid, and Social Security, these programs make up more than half of all federal expenditures each year and the percentage of the pie continues to become larger.  Are these programs inherently bad?  That is a matter of perspective.  However, what is not a matter of perspective is the federal debt is increasing and the socialistic tendencies of our government are responsible.

What about the wars?  Don't they contribute heavily to the national debt?  They do, but the government programs listed above are continuous.  Wars end eventually.  Those programs have yet to cease.  If you read this and are steaming mad, thinking I believe we should abandon these programs, think again.  What I am trying to show is Americans are right in thinking socialism would hurt the nation.  Many citizens have and still do believe we provide a "handout" or have become a society based on the "dole."  A certain degree of truth exists in that idea but more importantly, these programs will eventually cripple the nation. 

If this is such an urgent problem, why isn't our government making these difficult choices and working on reducing the debt?  The answer is in the question -- because it is not urgent.  This is a long term issue and this generation won't be around to see the fallout from their poor policies.  The children, grandchildren and even great-granchildren of this generation will be left to deal with the problems we have laid on their doorstep.

In our "instant society," people have developed a tunnel vision or blinders of some sort.  We only see or can comprehend what is in front of us.  Or many people are too stupid to understand ... and some simply refuse to care because it won't affect them.  How many times have you heard someone say, "It's not my problem" ?

The latest example of these shenanigans appeared yesterday as Congress voted for (and Obama approved) a measure that would allot over $24 billion to states so they could provide unemployment benefits to those who have been without a job for six months or more.  Critics of the bill pointed to the fact that this money would have to be borrowed.  Supporters claim the money is needed for families in desperate need of relief.  Our country continues to try plugging holes in the dam with their fingers.  While I do not doubt there are people in need -- the federal government cannot turn into a piggy bank at will.  How many more times can the nation sell its soul?

This November, I have a feeling a new sheriff will be in town.  After years of poor spending policies, a small segment of citizens are creating a big enough wave that has already ousted numerous incumbents, including West Virginia Representative Alan Mollohan (a 14 term incumbent).  This is a message to the government that you need to grow up and start making those difficult decisions.  Making those decisions are why you are given the power, money, and prestige.

No comments:

Post a Comment