Once again the federal government has reached
its "debt ceiling," and once again Congress is poised to authorize
an increase in government borrowing. Between its ever-growing bureaucracies,
expanding entitlements, and overseas military entanglements, the federal government
is borrowing roughly $1 billion every day to pay its bills.
Federal law limits the amount of debt the U.S. Treasury may carry, and the
current amount a whopping $7.4 trillion has been reached once
again by a spendthrift federal government. Total federal spending, which now
exceeds $2 trillion annually, once took more than 100 years to double. Today
it doubles in less than a decade, and the rate is accelerating. When President
Reagan entered office in 1981 facing a federal debt of $1 trillion that had
piled up over the decades, he declared that figure "incomprehensible."
At its present rate of spending, the federal government will soon amass $1 trillion
of new debt in just one year.
Government debt carries absolutely no stigma for politicians in Washington.
The original idea behind the debt limit law was to shine a light on government
spending, by forcing lawmakers to vote publicly for debt increases. Over time,
however, the increases have become so commonplace that the media scarcely reports
them and there are no political consequences for those who vote for more
red ink. It's far more risky for politicians to vote against special interest
Since 1969, the federal government has spent more that it received in revenues
every year. Even supposed single-year surpluses never existed, but were merely
an accounting trick based on stealing IOUs from the imaginary Social Security
trust fund. Remember that the total federal debt continued to rise rapidly even
during the claimed surplus years. Since Congress is incapable of spending only
what the Treasury takes in, it must borrow money. Unlike ordinary debts, however,
government debts are not repaid by those who spend the money they're
repaid by you and future generations.
The federal government issues U.S. Treasury bonds to finance its deficit spending.
The largest holders of those Treasury notes our largest creditors
are foreign governments and foreign individuals. Asian central banks and investors
in particular, especially China, have been happy to buy U.S. dollars over the
past decade. But foreign governments will not prop up our spending habits forever.
Already, Asian central banks are favoring Euro-denominated assets over U.S.
dollars, reflecting their belief that the American economy is headed for trouble.
It's akin to a credit-card company cutting off a borrower who has exceeded his
credit limit one too many times.
Debt destroys U.S. sovereignty, because the American economy now depends on
the actions of foreign governments. While we brag about our role as world superpower
in international affairs, we are in truth the world's greatest debtor. Like
all debtors, we are not truly free. China and other foreign government creditors
could in essence wage economic war against us simply by dumping their huge holdings
of U.S. dollars, driving the value of those dollars sharply downward and severely
damaging our economy. Desmond Lachman, an economist at the American Enterprise
Institute, states that foreign central banks, "Now have considerable ability
to disrupt U.S. financial markets by simply deciding to refrain from buying
further U.S. government paper." Former Treasury secretary Lawrence Summers
warns about "a kind of global balance of financial terror," noting
our dependency on "the discretionary acts of what are inevitably political
entities in other countries."
Ultimately, debt is slavery. Every dollar the federal government borrows makes
us less secure as a nation, by making America beholden to interests outside
our borders. So when you hear a politician saying America will do "whatever
it takes" to fight terrorism or rebuild Iraq or end poverty or provide
health care for all, what they really mean is they are willing to sink America
even deeper into debt. We're told that foreign wars and expanded entitlements
will somehow make America more secure, but insolvency is hardly the foundation
for security. Only when we stop trying to remake the world in our image, and
reject the entitlement state at home, will we begin to create a more secure
America that is not a financial slave to foreign creditors.