What's the Big Deal?

"What's the big deal about the debt?" a lot of people ask. I will tell you: last year the U.S. government spent over $400 billion in interest on the debt. Not a nickle went toward the debt itself. That's $400 billion that could have been used for welfare, social security increases, heath care, tax cuts, cleaning up the environment, cancer research, you name it. That money did nothing but buy us time. President Obama wants to run the debt up even more, a lot more. If he gets his way, and he will, our interest payments will be even higher next year. 

You want to know what the big deal about the debt is? Washington currently spends more in interest on the debt every year than it does on housing, education, and transportation combined. The bigger the debt, the more in interest we pay. The more in interest we pay, the less we have left over to take care of things in this country that need taking care of. 

Interest Expense Fiscal Year 2013:
September $19,843,542,012.01
August $25,487,831,947.93
July $25,076,777,459.95
June $93,031,790,187.97
May $24,378,480,861.09
April $35,951,751,963.63
March $23,472,400,737.30
February $16,901,310,565.17
January $17,816,590,831.57
December $95,736,594,801.52
November $25,068,968,472.99
October $12,922,741,407.27
Fiscal Year Total $415,688,781,248.40
 
That is well over $400 billion right out the window in one year. Not a nickle was applied to the principal. That is what the big deal about the debt is. So sure, let's pile a few hundred billion more on top of what we already owe. We can figure whose throats have to be cut to make debt payments later when we draw up the new budget. Well, maybe not. Maybe we can just keep on borrowing until we find some platinum meteors to lasso.

A lot of you went to college. Many of you have credit cards. Perhaps some of you have taken loans from the bank or taken out a mortgage so I am sure you know the mechanics of borrowing money.  Borrowing money is not the tricky part of debt. Paying it back is what can kill you. At some point the government is going to have to start paying down the debt if it is to avoid bankruptcy. It simply cannot keep borrowing in perpetuity. That is not a political position. It is an economic certainty.

The problem we have at them moment is not political. It is economic. It is the solution that is political. The longer the government bleeds red ink the more difficult the solution will be. Difficult decisions and hard choices will have to be made. Vagaries and vows will not be enough. Making those decisions is the job of politicians. The inability of Washington to address the issue head on is not due to the diffidence of Congress, it is due to the diffidence of the public. It is the public that will bear the consequences of higher taxes and budget cuts. Cutting the budget will take no food off the table of elected officials in Washington. Losing their job might.

What good news there is regarding the problem usually comes in the form of arguments that the U.S. can afford to carry the debt it has, and can even increase the amount many trillion more without undermining the economy. This may be good news in regard to the current financial crisis. The country will not collapse tomorrow or next year if the debt limit is raised. Even if it raised many more times in the future the U.S. should be able to find a way to carry the additional debt. But that news is only good for the time being.  Experts may disagree where the wall is, but none can deny there is a wall and if a solution cannot be found that we will eventually hit it. Others tell us that things are going to change for the better soon, the economy will improve therefore tax receipts will go up. But no one is forecasting a recovery large enough to overcome the deficit. Like the savings predicted as stimulus spending wound down and bailouts ended, any impact on the deficit is problematic. It presumes that any increased revenue will be applied to paying down the debt and not simply spent elsewhere.

Sooner or later the government is going to have to show some black ink. There is no other way out of the problem. If and when that black ink appears, any net revenue will have to be applied to the debt and not spent. That cannot be relied upon. There is too much ambition and pent up frustration in Washington for there to be no pressure for a surplus not to be distributed. If history is any guide, the political will to stiff arm constituents cannot be relied upon.

Buying time by borrowing ever more money only makes the solution more difficult. Lurching from crisis to crisis will not solve anything. A plan is needed. What that plan might be has yet to be decided upon. Whatever the plan will be, it will have to eventually include the cessation of borrowing. You cannot borrow your way out of debt. By the time you go to bed tonight the national debt will be over $17 trillion. Many millions more will be added to it by the time you awake. Sleep tight.