As Congress and the White House spend a summer weekend wrestling with negotiations over the debt limit, it helps to step back and look at the overall U.S. debt picture.
Since mid 2008, we have been on a dangerous trajectory, borrowing for TARP, stimulus plans of both spending and tax cuts, two wars, extended unemployment benefits, more tax cuts this past December and more and more defense spending.
Some argue that the only legitimate function of government is defense. Since we can never be safe enough, in principle there is no upper limit to how much we should spend on defense. Friday’s BEA report on GDP shows a 7.3% increase in defense spending.
“We can not abandon the most vulnerable members of our society” is a mantra repeated by some. As the population grows, so too will the vulnerable members of any society. As the population ages, that vulnerability will increase exponentially. In principle, there is no upper limit on our caring and generosity.
In reality, of course, there are limits. In our individual lives, in our communities and in the nation as a whole, we must struggle with the contradictions between our loftier principles and the harsher realities of living. For a while we can delay the reconciliation of principle and reality by putting off the inevitable compromises.
We have a natural knack for prognostication – one that we exhibit at an early age when we don’t clean up our room, do our homework or some other petty chore. Peoples of the future may label us “Homo Prognosticator”, not “Homo Sapiens.”
Debt is one indication of prognostication. We are getting really good at putting things off in the hopes that, one day, it will start getting better.
Below is a chart of federal debt since 2004, showing the increasing change in slope of the debt owed by all of us – our future selves, our kids and grandkids.
As I have noted in previous blogs, we have both a spending and revenue problem. To deny that we have both is more than prognostication – it’s delusion. Neither problem has broadly palatable solutions but the longer we delay implementing solutions, the worse it will get – exponentially worse. Anyone who has charged way too much on credit cards is well aware of that. The interest on the debt increasingly worsens any solution until bankruptcy is the only answer.
National bankruptcy is the sum of over 300 million personal bankruptcies.