I read a lot: newspapers, books, the internet, magazines, labels, you name it. As terrifying as I find, say, the chemical composition of whatever that is that Taco Bell is serving, nothing that I’ve read recently has alarmed me as much as this piece I’m going to link to in the next sentence. That’s because, if you didn’t like what you saw with the Great American Recession, hang on, ’cause here’s what happens if Congress doesn’t lift the debt ceiling. The Recession was merely the warmup; imagine the government failing to pay its vendors — i.e., U.S. businesses — and those businesses failing to pay their vendors, and those vendors and everyone above them in the food chain performing massive layoffs. How long do we have before this scenario starts to play out? About two weeks.
But wait, there’s more.
That particular problem has a solution: a Congressional vote to increase the debt ceiling. That buys us more than two weeks. But it in no way addresses the actual problem — that most days, the U.S. Treasury takes in far less money than it needs to fund government operations. We’re all aware of this deficit, at least theoretically. But when you look at actual numbers, it gains a new cogency. Here goes:
On Monday, it took in almost $26 billion, but on Tuesday it took in less than $4 billion. Through Tuesday, the Treasury has received a little less than $1.3 trillion in taxes for fiscal year 2011, but has made payments of almost $7 trillion. The reason the payment number is so large is because it includes funds that were paid to Treasury’s lenders, whose securities matured and needed to be paid off. …
… But of course, because the federal government runs a budget deficit, the Treasury must borrow a little more on most days. On Monday, there was a net increase in Treasury borrowing of $33 billion, on Tuesday the increase was $11 billion. This is how much the national debt increased on those days. As of May 3, the total amount of debt outstanding was $14,280,140,000 and the debt limit is $14,294,000,000.
Yikes. Reading this made me want to run home to our secret hiding place and cash in every U.S. savings bond and treasury note we have. (Which, of course, would only exacerbate this problem. So please: If you own bonds or notes, please stop reading this now and don’t do what I may well do.) The looming debt limit is a cashflow problem that can be addressed; the deficit is the credit card that we’ve charged into oblivion and now can’t make the payments on.
Who is responsible for this? Well, all of us. We want more benefits, but we don’t want to pay for them. We want massive tax cuts and deductions, but we don’t want reduced services. It’s become the American way. If this plays out, the subprime mortgage meltdown will be just the opening act on a nightmarish drama.
Alexander Hamilton, who built history’s most stable currency, a currency that funded an ideal and an empire, is spinning in his grave.