Breaking China : The bottomless national credit card
Posted on Friday, October 3, 2008
In the ongoing debate about federal bailouts for the financial sector, one phrase keeps cropping up - U. S. taxpayers should not get stuck with the bill. An even more loathsome scenario would be passing the cost to our children or grandchildren.
As one of those taxpayers, I should be grateful that our leaders are looking out for my interests. But, charming though the thought may be, it's really not necessary. Any representation that the taxpayers are going to pay for this is unadulterated, mendacious bovine sediment. Despite assertions to the contrary, U. S. taxpayers won't be paying for a bailout now or anytime in the near future. It will simply get charged to the national credit card.
Let's review the bidding. The nation has been running deficits for the last seven years. A deficit means that the taxes were insufficient to pay for all those wonderful goods and services that were thrown into the national shopping cart. Any talk of raising taxes gets our politicians baying like a pack of bloodhounds on the trail of an errant jailbird. Are we to believe that a nation seemingly incapable of operating on a pay-as-you-go basis is suddenly going to make good on the trillions of dollars of debt racked up over the past half century ? I rather doubt it.
Think back to that much-maligned president of yesteryear, Jimmy Carter. Carter lamented that the nation's grandchildren would end up paying for the billions his administration added to the national debt. Hopefully, all that hand wringing didn't create calluses. Those grandchildren have grown and are now taxpayers themselves. Are they paying off the debts of the Carter administration as advertised ? Hardly. The national debt is growing, and at a record pace.
Ronald Reagan was decidedly less inhibited when it came to running up a tab. With theatrical disgust, he reluctantly signed the bill authorizing the national debt to exceed a trillion dollars for the first time in U. S. history. He then unleashed supply-side economics. Every Republican administration since has made runaway deficit spending an integral part of their fiscal policy.
The national debt has been the ointment to our problems for so long, we've gotten to where we use it as the universal salve. Wall Street needs $ 700 billion to cover those idiotic mortgages ? No problem. Detroit wants a paltry $ 25 billion because they decided long ago to stop making cars that anybody wanted ? Coming right up. President Bush received $ 150 billion based on the loopy logic that if every family in America buys a plasma TV made in Malaysia, this would stimulate our economy. My good man, why so miserly ? If Alaska can pay $ 2, 000 to every man, woman and sled dog just to live in that frozen wasteland, surely Washington can throw a grand to the rest of us. Think of it as a cash advance on the national credit card.
We've been wallowing in the elixir of deficit spending for so long we can't imagine living without it. A problem with ointments is that if you look hard enough, you can usually find the flies. A proper use of the national debt is unforeseen emergencies - perhaps a war (maybe not this one ) or a fiscal calamity (definitely not this one ). A clearly improper use of the national credit card is for day-to-day living expenses. Yet, with the exception of the final years of the Clinton administration, this is what America has been doing for decades. Currently at just under $ 10 trillion, the debt is forecast to grow to between $ 12 trillion and $ 17 trillion in 10 years. Unforeseen events such as the next war (there's always another ) or fiscal calamity (ditto ) aren't included in the forecast.
Meanwhile, huge unfunded liabilities are waiting in the wings. These include federal pension guarantees, veterans' benefits and repairs to bridges that have been rusting for decades. Then there are the two 800-pound gorillas - Social Security and Medicare. When those are included, according to former U. S. Comptroller Gen. David Walker, the national debt will grow to $ 53 trillion. Thus far, the world seems to think that we're good for our debts. However, there will come a day - long before we ever hit $ 53 trillion - when the lenders will say "enough already. "The good news is that no child, grandchild or great-grandchild will ever be asked to pay off the debt, nor could they even if they wanted. The bad news is that the debt will continue to rack up hundreds of billions of dollars in interest every year that could otherwise be used for something productive. Sadly, it is likely that exhausting all available credit on the national credit card may be what it takes to force our government to become fiscally responsible.
• • • Doug Oliver is a research geologist living in Bentonville. He can be reached at dholiver @ uark. edu.
FEEDBACK:
Something to say about this topic? Submit a Letter to the Editor online