By the time you read this article we will know whether the United States Congress has passed new authorization to raise the “debt ceiling.” If they haven’t then those who prognosticate about such matters will be crying, a la Chicken Little, “The sky is falling! The sky is falling!” Will the United States be forced to renege on its debt, and suffer the humiliation of having to default on its debt? Will we lose the coveted “AAA” credit rating? And who will be the scape goat in all of this?
Now, let me be clear – I am no economic expert. I do not have a degree in anything remotely related to the field of mathematics. I’m just a guy who, when I first started out in life as an adult, paid for everything in cash: gasoline, rent, groceries, car loan, etc. I did not possess a credit card. In fact, I couldn’t get a credit card for one simple reason: I had no credit! I remember discussing this with a Standard Oil/Chevron representative in 1973 when I was attempting to get a gas credit card. After kicking around this problem of not having established credit, I said to him, “So you’re telling me I do not qualify for one of your credit cards because I have always paid all my bills in cash?” He said, “Well, yes.” I was twenty-five years old, a Vietnam Vet, having served four years in the Marine Corps, and was back in college working on completing my bachelor’s degree. In order to get a credit card I would need one of my parents to sign me up under their card. This seemed absurd to me!
It has amused me and saddened me at the same time watching Congress dither over the budget and whether we should raise the debt ceiling. I’ll explain this mess in terms that are best understood by me. First: We need some adult leadership in the two houses of Congress! Second: Our elected representatives should live by a principle we all were taught as children – “Do not spend more than you take in!” Third: Never mind what the rest of the world thinks about us – Do the right thing!
What exactly is the “Public Debt”? “The United States public debt is a measure of the obligations of the United States federal government and is presented by the United States Treasury in two components and one total: 1) Debt Held by the Public – representing all federal securities held by institutions or individuals outside the United States Government; 2) Intragovernmental Holdings – representing U.S. Treasury securities held in accounts which are administered by the United States Government, such as the OASI Trust Fund administered by the Social Security Administration; and 3) Total Public Debt Outstanding – which is the sum of the above components.”
“As of June 29, 2011, the Total Public Debt Outstanding of the United States of America was $14.46 trillion and was approximately 98.6% of calendar year 2010’s annual Gross Domestic Product (GDP) of $14.66 trillion. Using 2010 figures, the International Monetary Fund places the total U.S. debt at 96.3% of GDP, ranked 12th highest against other nations.”
Historically, the United States has had debt from its inception. As a result of the American Revolutionary War and the Articles of Confederation, the first annual reporting of the debt was $75,463,476.52 on January 1, 1791. In the first 20 years following the War of 1812, 18 surpluses were experienced and the U.S. paid off 99.97% of its debt.
Those who make light of our problem with debt are willing to raise the debt ceiling in order to increase the amount of borrowing power the United States may have. This, however, exacerbates the problem! We are, as the figures show, running a debt amount that is equal to the amount of money that is brought in annually by the American people. We are operating our country using every dollar we spend just to cover the debt. At some point this house of cards is going to collapse, throwing us into a financial crisis that will exceed any and all monetary collapses in the past. Gross debt has increased $500 billion each year since fiscal year 2003.
Let’s say our national debt was closer to what our founding fathers faced in 1791. We’ll round it off to $100,000,000.00 (One hundred million). Divide that by the number of days since the birth of Christ @ 730,000. You would have to spend about $130.00 a day for that many days to pay off the hundred million dollar debt. Now, for a debt figure such as we have today of $14,600,000,000,000.00 (Fourteen Trillion, six hundred billion), divide this by the same number of days, and you would have to spend close to $20,000,000.00. Does this help you see the serious problem we have? That’s $20 million a day for 2000 years to pay off the current $14.6 trillion debt!
There is some good news in all of this! As a nation, we bring in so much money each month from taxes and other incomes that we have enough money to cover Medicare/Medicaid, the military, Social Security, and the Debt. That’s a huge amount! But if we keep raising the taxes on the American people, American-based businesses will produce their products elsewhere outside of the U.S., thus damaging our economy all the more.
Pay attention to this Congressional debate over the budget. We can ill afford to keep raising both the debt ceiling and taxes. For the first 50 years of our nation’s history, the debt was virtually paid off every year. Can we do that today? I believe we can. More importantly, if we are going to leave a nation worth having to future generations, we must pay off our debts – even if it hurts in the short term.