Another day older and deeper in debt

The saying goes that nothing is certain except death and taxes. In America, it seems nothing is certain except debt and taxes.

Our country is the victim of one of the biggest con games ever committed, an epidemic spreading so fast that the chief auditor of the United States calls it a “fiscal cancer.” And it’s a disease that only now – with an economy on the brink of a recession, mounting inflation, rising unemployment, and a devalued dollar – is causing sufficient alarm.

Our nation is more than $9 trillion in debt, and the interest – just the interest – is the single largest growing budget item for the federal government. In fiscal year 2006, the government spent $406 billion of taxpayer’s money just on interest payments to holders of the national debt. Compare that to NASA at $15 billion, the Department of Transportation at $56 billion, or Department of Education at $61 billion.

This “deficit financing” is the one of the biggest fraud schemes ever committed. Consider that the government has no source of revenue except for the taxes we pay. In order to be able to – temporarily – ignore reality, it borrows money from you today, to be repaid with money it will borrow from you tomorrow, which will then be repaid with money it borrows from you the next day, and so on.

The result: $9,399,479,679,123.04 of debt and a government that finances its spending habits by printing up more paper money.

Through deficit spending, the government has cut the connection between money and tangible goods. The currency it uses is not backed by goods, it’s no longer backed by gold, it’s not backed by anything. Our currency is simply paper, printed out by the Fed at the whim of a self-indulgent White House.

Now, with fears of a recession looming, the government has jumped in with emergency measures and economic stimulus packages to try and salvage the economy. Bush’s recently approved economic stimulus package, combined with lower interest rates, may or may not stop the American economy from slipping down the tubes. The hope is that the tax rebates will immediately be spent by consumers, and kick-start the economy back into action; in other words, a temporary problem (recession) hoping to be solved by a temporary fix (tax rebates) by politicians focused on short-term problems and driven by short-term election goals. Whether it will actually work to stimulate the American economy is dubious, considering that much of spending is done on foreign consumer goods from China, Korea and India.

In the meantime, the real root of America’s economic problems is growing to the tune of $1.7 billion per day, and the stimulus package is just adding on to that.

“We have been diagnosed with fiscal cancer,” said David Walker, chief auditor of the United States. “It seems clear that our nation’s current fiscal path is unsustainable.”

It took the U.S. from George Washington until Ronald Reagan – approximately 200 years – to reach the first $1 trillion in debt. Since then, we’ve accrued the remaining $8 trillion.

Chairman of the Fed, Ben Bernanke, admitted that the time to solve the debt problem was “ten years ago.” I would argue that the time to solve the debt problem was well before it ever even happened – before the 1930s when John Maynard Keynes first convinced American taxpayers that deficit spending was a good thing. In that one foul swoop, the U.S. went from its Constitutional standpoint as a laissez-faire economy, to a nation where the government sticks its messy hands in to the market, justifying its inability to live within its own means by spending the country trillions of dollars into debt.

The debt forces the nation’s economy to become an international issue as well.

Japan ($580 billion), China ($390 billon) and the United Kingdom ($320 billion) are currently the largest holders of U.S. debt. Do we really want America’s biggest economic competitor financing our government and earning interest on that?

As individuals, we are obligated to live within our means. Debt is seen only as a temporary fix, and we generally restrain our spending, knowing that we’ll have to pay back every dollar we borrow.

When it comes to the government, however, the borrowing is done by administrations and politicians who know that they will never themselves have to pay that money back. That’s why, every so often, the government lifts its own debt limit to allow itself to spend more.

The issue at stake is not merely whether an administration can balance its checkbook for an election period. What’s at stake is the economy which Americans have spent 350 years building into the world’s powerhouse. It’s time for American taxpayers to understand that every dollar of that government debt will have to be repaid, and if its not repaid by us, it will be by our children and grandchildren. By continuing to finance our economy with non-existent money, we’re taking out a mortgage on the earnings of children who are yet to be born.

Stop deficit spending, return to the gold standard, reduce the national debt. That’s the kind of “change” I want to hear the 2008 presidential nominees talking about.

Marlize van Romburgh is a journalism and economics junior and a senior staff writer for the Mustang Daily.