Debt. It’s a four-letter word for a reason. Used to your advantage it can be a tool for generating investment return or acquiring the capital needed to expand a business. Accumulate too much of it and you are destined for pain.
As you read this article recognize that in addition to any debt you already have (i.e., a mortgage, car loan) your government has also saddled you with $93,000.00 based upon the current national debt.
Is there any doubt now why there is a raging debate underway amongst our elected officials over debt and in particular the Debt Ceiling. Before diving into deficits, debt or the debt ceiling a few definitions might be helpful.
Let’s begin with the deficit. The deficit is the amount of government spending that exceeds tax receipts in a given year. For example, in Fiscal Year (FY) 2022 our Federal Government spent $6.27 trillion dollars while taking in $4.9 trillion resulting in a deficit of $1.38 trillion.
The national debt is the total amount of accumulated borrowing on the part of the Federal Government over the nation’s history. As of today, the national debt stands at $31.4 trillion dollars and represents overall spending by the government that has exceeded tax receipts. In order to finance such spending, the government must ultimately issue and sell marketable securities including Treasury bills, bonds, notes, etc., selling these instruments to investors and ultimately having an obligation to pay investors interest and the principal amount of the security. Keep in mind that today’s $31.4 trillion dollar debt does not include future obligations for social security, medicare and other government programs. When you add these to the mix the number balloons to well over $100 trillion.
The Debt Ceiling is the legal limit on the total amount of debt the Federal Government can accrue. The Debt Ceiling was originally enacted in 1917 as a means of making the process of borrowing money easier. In 1939 Congress created the first aggregate debt limit ($45 billion) and it has been growing ever since. It is instructive to understand that prior to these actions by Congress, anytime the Federal Government desired to take on debt, it was required to approve each debt request individually. Oh, the good old days!
For some perspective, it is helpful to attempt to picture what $31.4 trillion dollars represents. According to the Peter G. Peterson Foundation $31.4 trillion is larger than the economies of China, Japan, Great Britain and Germany combined. Not visual enough? Check out the visual in the link below. The fact is, you can’t even fathom how much $31.4 trillion is but here’s one image.
Not only is the debt growing, but the ceiling is as well. For example, according to the Congressional Research Service, since WW II, Congress and the President have increased the Debt Ceiling over 100 times. And since the 1980’s as the chart below clearly indicates, the Debt Ceiling is on a rocket ship ride with no end in sight.
Given the size of our debt, if nothing is done to curb spending, it is estimated that the interest payments on this debt will soon be the single largest part of the Federal budget on an annual basis. Bigger than defense spending, bigger than social security spending, bigger than medicare spending. Like any debt, there will come a day when payback is required and the burden of continued deficit spending year after year will ultimately fall upon future generations. Look at it from this perspective, every child born while you are reading this article will come into the world already owing $93,000 assuming the Federal Government began to control spending today.
As if this weren’t bad enough, the more debt accumulated by the Federal government, the more money the Federal Reserve creates out of thin air. This ultimately causes the money you have to be of less value or in other words – causes inflation. Couple America’s current debt with the Biden Administration’s war on energy and you have a politically engineered economic disaster which has destroyed wealth for all American’s – well that would be all except the oligarchs and of course, the politicians.
Given this scenario, you would think this situation would cause our elected officials to do everything possible to cut spending and act in a fiscally responsible manner. However, you would be wrong. In fact, we have a large majority of politicians and those within the Biden Administration who are actively calling for an increase in the Debt Ceiling which would give them the legal authority to spend even more. As evidenced from my recent blog “Take a Ride on the Omnibus – Destination – Misery”, you could almost accept the spending if American’s weren’t under such immense inflationary pressures and the money was being spent on something of value. But with people in our nation having to decide between spending on food or heat, and money being pissed away, this is hardly the time for elected officials to be spending even more.
Many of those calling for an increase to the Debt Ceiling claim that without such an increase, the US Treasury will default on its obligations to pay back bondholders which would cause a greater economic crisis. Frankly, this claim is a scare tactic designed to give politicians more power to take your money and funnel it to their special interests. As with any individual dealing with a debt crisis, the Federal Treasury can very easily prioritize debt payments, avoiding defaults while many of the nonsensical spending projects outlined in the latest Omnibus Bill just won’t get funded – although I just don’t know how can we live without the Michelle Obama trail. By forcing this approach, the House of Representatives can use the Debt Ceiling debate for good. They can ultimately get politicians and the White House to focus on what is in the best interest of the American people and target spending to those areas of absolute need.
It is estimated that the Federal Treasury will be in a position to cover debts coming due through this summer, making a final resolution to the Debt Ceiling question something that needs to conclude prior to this time. Will politicians do the responsible thing and get this done early? I’m doubtful. Like everything in Washington, the Debt Ceiling is being evaluated, not based upon its impact on American individuals and businesses, but on how it can be used to further political objectives. As a result, it’s more than likely that the fight on this topic will go down to the wire. Who knows, with any luck, maybe the government will shut down. That’s one way to stop spending.
So, I ask the question, would you take on this level of debt in your own business; in your own life? Would you ignore it and saddle your children with the responsibility? If you were already struggling to make your mortgage payment, would you also take on debt to add a new addition to your house or a swimming pool? Of course, you wouldn’t. Frankly, you wouldn’t be given the opportunity to do so because nobody in their right mind would lend you the money. Unfortunately, such restrictions don’t apply to our elected officials and unless we either vote them out of office, pressure them or hope sanity will prevail we may very well find ourselves staring down the barrel of an even larger personal debt obligation courtesy of those who claim to represent us.
Tired of the Washington establishment? If so, in addition to voting incumbent politicians out of office there is a way to lessen the damage being caused by lifetime politicians. It’s called the Article V Convention of States and it’s a movement of citizens of all political parties who are tired of the status quo. Article V of the Constitution provides a mechanism for the States to call for a Constitutional Convention to amend the Constitution. How do amendments for Congressional Term Limits and a Balanced Budget sound? If they sound good to you click here to sign the Article V Convention of States petition and begin putting pressure on your State legislators to call for a Convention.
While taking on some level of debt is often necessary to fund meaningful projects and initiatives, our spendthrift politicians have taken this to a level, that if not reigned in, could be catastrophic. It's time to force our elected officials to control their spending in the same manner we are required to do so in our businesses and our own personal lives. Hopefully sanity will prevail and we will have enough brave officials draw the line against continued generational theft.
May God Bless America!
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