In your debt (and yours, and yours, and yours)
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.
May 6th, 2011 at 6:48 pm
Exactly. Bigger than that is the revelation of our total debt against the backdrop of our NET WORTH, the combined infrastructure of the U.S. is many times bigger than merely our debt. Think of it, we’re going to go totally out of business just because we owe a few trillion? Bullshit. I borrowed money many times to stay in my former business. It was worth it, every dime in my 401k is proof of it. I say just borrow the money and sell the bonds, and we stay in the game. Where else is anyone going to invest? Investment founded the nation, fought the Revolution, beat Hitler, and rebuilt Europe after that. They’re in a losing position now, more proof that everything is timing.
May 6th, 2011 at 6:51 pm
I’ve thought for awhile that Americans have forgotten that we live in a community that is there to support each other. We have become a nation of people only interested in themselves. Yes it costs money to run the community but as you stated no one wants to pay taxes. We want services but not to pay for them. Tax cuts are demanded and the politicians are more than happy to oblige. They spin fantasies of tax cuts paying for themselves and that cutting taxes on the rich will enable them to spend more.
The sad thing is that not much will change with today’s political atmosphere. Each side bemoans the lack of civility and cooperation but nothing changes.
It is very scary that the people that we elected can not get together to address the issues that face us.
We live in a community, a common unity, and that we need to remember.
May 13th, 2011 at 1:24 am
I cannot see a way out of this, save for a massive crisis such as a WWIII. Does anybody have any alternatives?