On the National Debt
Several of the responses that I have seen from the Left in recent days, and, alas, from the Right, compels me to believe that not only does the public and the elite not grasp the true depth of the fiscal Armageddon facing the Republic, their ability to avoid grasping it is the single greatest feat of mental malfeasance, of willful blindness, in history.
I have added the National Debt Clock to my site, so you can see the numbers in all their glory of what you owe our leaders. Mark the numbers marching like the mindless broomsticks in the Sorcerer’s Apprentice, whose endless advance no ax can stop.
I have found a brief and clear explanation of this depth.
Federal debt began the 20th century at less than 10 percent of GDP. It jerked above 30 percent as a result of World War I and then declined in the 1920s to 16.3 percent by 1929. Federal debt started to increase after the Crash of 1929, and rose above 40 percent in the depths of the Great Depression.Federal debt exploded during World War II to over 120 percent of GDP, and then began a decline that bottomed out at 32 percent of GDP in 1974. Federal debt almost doubled in the 1980s, reaching 60 percent of GDP in 1990 and peaking at 66 percent of GDP in 1996, before declining to 56 percent in 2001. Federal debt started increasing again in the 2000s, reaching 70 percent of GDP in 2008. Then it exploded in the aftermath of the Crash of 2008, reaching 102 percent of GDP in 2011.
(Source: http://www.usgovernmentspending.com/federal_debt which is explained in more detail here and ultimately comes from www.gpo.gov.)
Keep in mind what we are discussing. GDP is the gross domestic product, an economic shorthand for the total value of all goods and services produced by the entire American economy. Now, over one hundred percent, or, in other words, all of the economic activity of the National economy for this year is insufficient to pay our bills.
It is insufficient even if the entire economy, all of it, every penny earned by every man, woman, child and talking dog went immediately to service the debt, and not to any other use whatever.
This figure does not include state and local deficit spending, nor unfunded mandates like Medicaid. Nor does it include personal debt.
The money is gone. All of it is spent, and all the nation will ever make.
Raising taxes on the rich will not do anything. Even if all the wealth of everyone worth more than a quarter million a year were confiscated outright, all of it taken, one hundred percent, it would not do anything. For that matter, pulling the plug on PBS, Big Bird and all, will not do anything. These are purely ceremonial gestures, meant as political theater.
We are so far in debt that our children working their whole lives cannot pay back what has already been spent.
And our grandchildren, working all their lives.
If we do not pay back this debt, creditors will lose faith in our ability to pay it back. Since we do not have a gold standard currency, the only value our paper money has is the faith creditors have that the state can through taxes raise revenue enough to pay them back. The moment that faith flags and fails, they will sell off dollars and buy harder and safer assets. The sale drives the value down. Money will correct to its natural market value, which, under these circumstances, is nearly nothing.
If we attempt by various schemes, such as using Treasury bonds to buy debt from ourselves, to “monetize” the debt, that is, to inflate the currency so as to lessen the value of the debt, this will have the same effect as a transfer of wealth from creditors to debtors, which will again cause creditors to lose faith, sell off dollars and buy harder and safer assets. Again, money will correct to its natural market value, which is nothing.
When you hear about Quantitative Easing, and it seems like the arcane jargon of serious and intelligent experts using their high and hidden knowledge to solve or soothe the problem, keep in mind that “Quantitative Easing” is merely Orwellian gibberish for printing up worthless banknotes to inflate the currency. It is the way Wiemar Germany sought to escape the burden of their war debts, and what caused the hyperinflation of the Deutschmark.
The debt is an IOU, like the marker of a gambler. Without a gold standard, the creditors loan the state what is basically an unsecured debt. If we welsh out on the debt, the IOU becomes worthless. Since this the same instrument, paper money, that we are using for all exchanges of goods and services in the economy, and underpins the world economy, the rest of the world goes over the brink when we go over.
So we can neither repudiate nor monetize the debt, as this will cause inflation or hyperinflation, and destroy the value of the currency. Nor can we pay it back, not at current astronomical and insane spending rates.
What about working honestly to pay it back, like a man should who is a man?
Politically, we do not, as a nation, even have the will to slow the rate of the increase of the spending, nor to live within our budget, nor, if the last decade is any measure, to pass a formal budget, nor, if the last three years are any measure, pass an informal budget.
Politically, we do not, as a nation, have the will even to make token gestures toward cutting spending and raising revenue. We cannot even give the pink slip to Big Bird.
When you hear the great public debate about the so called ‘fiscal cliff” in January, or raising the debt ceiling, or taxing the rich or cutting some minor expense like Public Television, keep in mind it all means nothing.
Imagine if you bought your house and your car and then two more houses on your credit card, and a Zeppelin made of solid gold and a unicorn zoo, and then bought a candy bar, and you were debating with your accountant and the bill collector over whether you would pay for half the candy bar with the change in your pocket now or not.
Imagine if the half a candy bar debate filled all the time and energy of all parties, and the rest of the debt, gold Zeppelin and unicorn zoo all, was not mentioned.
The magnitude of difference between what the problem is and what we are discussing is astonishing.
That allegedly sober and sane men of the Left would greet the bad news that the whole world has gone broke not merely with shrugs of indifference, but with scorn and eye-rolling, sneering at the warnings as if at the false alarm of Chicken Little is beyond astonishment, beyond disgust, beyond words.
I do not understand what is so hard to understand. All the money is gone. It has all been spent.
We spent our future, and our children’s future. That is the problem.
I will say it again, just to be clear: We are so far in debt that our children working their whole lives cannot pay back what has already been spent.
And our grandchildren, working all their lives.
You ate them, dear voters, dear public, dear representatives, Dear Leader.
You ate our children. You ate their lives.
About John C Wright
John C. Wright is a practicing philosopher, a retired attorney, newspaperman, and newspaper editor, and a published author of science fiction. Once a Houyhnhnm, he was expelled from the august ranks of purely rational beings when he fell in love; but retains an honorary title.
