Borrowing Ourselves Into Trouble
While the nation narrowly avoided plunging over the debt default cliff in June, kicking the can down the road for two years won’t resolve our bigger problem. Namely, our spendthrift ways that have tripled the country’s collective red ink over the past 15 years.
If you weren’t already gasping over our gargantuan-sized problem, consider that in mid-June the New York Times reported that the gross national debt had exceeded $32 trillion for the first time in history.
I became more sensitized to this seven years ago while editing blogs for a financial columnist. He recalled presidential candidate Barack Obama calling the nation’s reaching a $10 trillion deficit under George Bush “immoral.” Then the deficit doubled during Obama’s eight years in office.
But after four years under Donald Trump, the deficit ballooned another $7 trillion. Just over halfway through Joe Biden’s tenure, it has jumped another $5 trillion.
Why worry? Consider that the National Debt Clock—created by real estate investor Seymour Durst—only began in 1989. That’s when the national debt was just shy of $3 trillion and 50% of gross domestic product (GDP).
Borrowing An Alarming Trend
I think it’s time to get alarmed. I interviewed a noted investment advisor in the late 1990s, when a number of commentators worried about deficits. But he told me that until the debt hit $25 trillion, we shouldn’t be that concerned, since Uncle Sam’s assets offset what we owed.
Well, we have passed that $25 trillion mark and no end is in sight. According to the Pew Research Center, for several years the nation’s debt has been larger than the GDP. In addition, servicing debt is one of the federal government’s biggest expenses.
One canary in the coal mine is the forecast that without adjustments to Social Security, the program will run short of cash to pay promised benefits by 2033, a year earlier than had been forecast. A key trust for Medicare will run out of funds two years before that, NPR reported in March.
“The only responsible thing to do is admit that we’ve got to make changes and we disagree about how to do it but let’s sit down and try to figure those out,” Maya Macguineas, president of the Committee for a Responsible Federal Budget, told the news service. “If we wait until the last minute, they’ll be much, much harder.”
As evidenced by June’s debt ceiling debate, it’s not hard to imagine us waiting until the last minute. I see hard choices ahead.
Words of Wisdom
It’s been nearly two centuries since America has been debt-free, a status last achieved under President Andrew Jackson. As a slave owner and creator of the “Trail of Tears” march, Jackson receives considerable modern-day criticism.
Yet, in his thoughts exist sound reasoning for avoiding debt, according to this article from the National History Education Clearinghouse. In “Freedom and the National Debt,” it notes that Jefferson considered debt creating dependence on one’s creditors, foreign or domestic:
“As (Jackson) famously wrote in Notes on the State of Virginia, ‘Dependence begets subservience and venality, suffocates the germ of virtue, and prepares fit tools for the designs of ambition. If the government involved itself in the creation and sustaining of credit and debt, it would naturally encourage ‘public and private profligacy’ … ”
In other words, with great debt comes serious problems. As Solomon put it in Proverbs 22:7: “The rich rules over the poor, and the borrower is servant to the lender.”
If we don’t curb our borrowing, we may find ourselves caught in a vise grip that won’t be pretty.