Tuesday, May 1, 2007

Grampa, Why Did You Ruin Our Country?

In two weeks, I will be 45 years old.

My oldest child just turned 16.

If his life follows the usual route I will be between 55 and 58 by the time I have a grandchild, and by the time that child will be able to rationally discuss economics I will most likely be in or close to my 70’s. I seriously doubt I will live long enough to meet my great grandchildren, much less discuss economics. I suppose I should be thankful for small blessings.

I don’t know what I would be able to tell them. What would I say when asked how my generation could leave them so saddled with debt. How can I explain the collapse of the way of life we as Americans know today? It is surely coming, and we as Americans are allowing it to happen.

As I have asked over, and over, and over, where is the outrage?

Pierre Tristam, over at Smirking Chimp, has posted an unbelievably disturbing article outlining the Bush majority’s raping of the budget. From surpluses under the Clinton administration to deficits that would make Reagan blush, he asserts that even at this point, balancing the budget isn’t enough. The problem is the mounting national debt.

[….debt depends on people willing to finance it. As of today, $5 trillion of the debt is held by the public -- individual Americans, banks and, increasingly, governments like China, Saudi Arabia, the European Union. At any point those governments could choose to invest elsewhere. If that happens, Americans, already the biggest debtors on the planet, have to make up the difference. Simply put, when Bush spends $2 billion a week on his wars in Iraq and Afghanistan, he's borrowing that money not only from China or Saudi Arabia, but from future Social Security and Medicare recipients, too. The Social Security trust fund, which is generating a surplus, literally lends the money to the Treasury. Government-to-government loans like that have added up to $3.8 trillion.

Balancing the budget will fix none of that any more than a household can stave off bankruptcy just by paying the interest on a mass of debt: Sooner or later a small interest rate rise or a mild economic shock collapses the arrangement. Only vast surpluses in the $200 to $300 billion range over several decades can pay down the national debt and stave off a flight of investors that would collapse the domestic economy. That's why the Clinton administration never proposed massive tax cuts when it reversed previous Republican administrations' Decade of Debt and started running surpluses in the late 1990s. Clinton knew that if the country was to meet its obligations to coming retirees and stay fiscally sound enough for investors to keep their money here, modest surpluses alone wouldn't do. Debts had to be paid. That means big budget surpluses year after year. …]

I know that with all of the other outrages the regressives have given us, the budget deficit and National debt may seem small potatoes. I know that talk of surplus and deficit isn’t as sexy as, well, sex scandals or Attorney-gate, or the pillaging of the constitution, or the war, etc….but I urge you to go read the article.

It may give you time to come up with an answer when your grandchildren or great grandchildren ask you how you could let this happen.


John said...

The national debt has only gone up. Did you ask your grandparents why they let that happen?

Brave Sir Robin said...

john -

There will always be debt, the problem is the scale of debt. If you max out you credit card, what do you do? Do you pay it down, or do you just go open another card? Eventually, your debt, and the interest will exceed your ability to pay. When that happens your creditors will stop issuing you credit and you become insolvent.

It's not that hard to figure out.

John in IL said...

OK, let's look at the scale of debt today. Debt held by the public as a percentage of GDP is 37%, about average for the last 45 years. Interest payments on debt as a percent of tax revenues are actually below average for the same time period(source: CBO; Historical Budget Data). Meh.

Brave Sir Robin said...

GDP is not really a fair indicator. All I'm saying, is would you pay all your bills on credit, and then expect your kids and grandkids to pay them off?

I wouldn't.

I know we will always have debt, but we cannot keep raising the debt ceiling while at the same time cutting taxes.

Eventually, China and Saudi Arabia will stop lending.

John in IL said...

Debt as a percentage of GDP is the measure economists use to judge the scale of a country's debt. Why don't you consider it a "fair indicator"? Your creditworthiness is judged by your ability to pay. If your income triples and your debt triples are you any worse off?