by Michael A. Cummings
Clash Daily Contributor
Debt is bad, right?
We’re told to worry about it, but as a country we’ve had debt a long time and we’re still here. Nothing has exploded. In Ghost Busters parlance, we haven’t crossed the streams.
I know, most eyes glaze over when talking about debt. And why not? It’s boring. Talking about debt must rank next to Hillary Clinton speeches for what people look forward to. But when you put our debt not in terms of dollars but in the consequences of dollars — i.e. what you can and cannot buy — the real world crashes in.
At the consumer level, we know debt is bad. How many of us have credit card debt ($15,191 per American)? We know what it feels like to have that hanging over our heads, to wonder if we’ll ever pay it off. The economic principle of opportunity cost — when you choose one thing you can’t choose another — never fails. When we have to pay for our credit card, car payment, big screen TV, etc., we can’t pay for savings, investments, or vacations. Debt equals chains. We get it.
At the national level debt and opportunity cost have the same effect, but most politicians don’t seem to know or care, or can’t properly communicate the seriousness of the issue. If the government can’t spend a dollar it doesn’t first confiscate from the American people — whether in taxes or future debt obligation — the problem is no different than when we consumers go into debt.
Recently the Congressional Budget Office released its 2014 Budget Outlook: “CBO estimates that, despite receiving record revenue gobbled up from the private economy, the Treasury will continue to run enormous deficits over the next 25 years. By 2039, the public share of the debt is projected to rise from 74% of GDP to 106%.”
What does this mean to you?
If we individuals would carry debt like our federal government, we might be able to get a few lenders to help consolidate our debt, but we wouldn’t be able to do this indefinitely.
Obama has increased out debt $7 trillion since taking office, more than all other debt from George Washington up to 2004. George W. Bush, you’re big spender #2 so you didn’t do America any favors in this regard.
Contrary to the perception of many policy-makers, the national debt is not some abstract problem that will only affect future generations once investors no longer trust the security of federal treasures. As CBO explains (page 10), this is an immediate and near-term problem:
o Federal spending on interest payments would rise, thus requiring higher taxes, lower spending for benefits and services, or both to achieve any chosen targets for budget deficits and debt.
o The large amount of debt would restrict policymakers’ ability to use tax and spending policies to respond to unexpected challenges, such as economic downturns or financial crises. As a result, those challenges would tend to have larger negative effects on the economy and on people’s well-being than they would otherwise. The large amount of debt could also compromise national security by constraining defense spending in times of international crisis or by limiting the country’s ability to prepare for such a crisis.
More bad news: The federal government adheres to the same low interest rates on debt that we experience as consumers. When those rates rise — expect that if we get a Republican president and/or Senate because this policy is entirely arbitrary — our current $230 billion in annual interest payments will go over $700 billion. Billion.
Paying all that debt before our other obligations means we won’t have a strong military and defense structure, our federal highway system will be in shambles, and — Leftists, are you listening? — we won’t be able to afford the immense welfare system (What will our illegal brothers and sisters think then?) The big three of Social Security, Medicare, and Medicaid with future obligations of over $100 trillion have no chance of survival even if we got our financial act together starting today.
If you thought shutting the government down hurt the 20 times we’ve done it before, you have seen nothing yet.
In 2013, several countries including the European Union and the United States, bailed out the Greek government because they defaulted on their debt. When our debt comes crashing down, we won’t be Greece; we’ll be worse. Due to the size of our debt, no one will have the ability or desire to bail us out, or those who do aren’t the ones we want to call our banker. Not that China, one of our largest benefactors, is the Mr. Rogers of the global economy.
We need a type of fire sale, as in “[most] everything must go.” If we get back to paying for what the Constitution allows — not to provide jobs skills for male sex workers in Peru and the multitude of similar abominations — there is hope.
Michael A. Cummings has a Bachelors in Business Management from St. John’s University in Collegeville, MN, and a Masters in Rhetoric & Composition from Northern Arizona University. He has worked as a department store Loss Prevention Officer, bank auditor, textbook store manager, Chinese food delivery man, and technology salesman. Cummings wrote position pieces for the 2010 Trevor Drown for US Senate (AR) and 2012 Joe Coors for Congress (CO) campaigns. See more at www.cummingsamerica.com and https://twitter.com/ cummingsamerica