Let’s Talk About Debt, Baby
Jul 11, 2011 @ 11:59 PM
Like any normal (?) 27 year old, I’ve spent a fair amount of time worrying about the looming debt ceiling, so it’s nice to finally see the headlines paying more attention to what will surely remain a hot topic in the coming weeks. For those of you in the throes of blissful ignorance — a group that does not include Paul Krugman, by the way — allow me to shed some light on this issue in my own particular fashion. Keep in mind that, thankfully, I am neither an economist nor a politician, but just one of many concerned citizens whose life stands to be impacted by Washington’s latest display of childish political theatre.
First, the setting: On one side of the stage we have a party that has consistently failed to respond to national problems with the severity that they require; on the other is a collection of obstinate anti-progressives who prefer to fiddle the discordant melody of partisan politics while a nation burns. And presiding over all of these players is an increasingly disappointing leader who, in a statement made earlier today, declared that the time has come for Americans to “eat our peas.” With very few exceptions, what do all of these individuals have in common? Well, in addition to acting like a bunch of petulant toddlers in custom-tailored suits, they are failing to lead at a time when their leadership is most sorely needed.
All of the recent banter about debt, deficits and the like has started to get a little confusing, so before moving on I think it’s worthwhile to introduce a brief example that highlights a few basic concepts. This will seem rudimentary to some, but in the interest of keeping us all on the same page please consider the following scenario:
Captain Boehner earns $100 per month but feels compelled to support a crippling legume addiction by spending $200 on designer wasabi peas from Japan. Consequently he ends up spending 100 more dollars each month than he actually has, which represents his monthly deficit, or the amount by which his total expenditures exceed his total earnings. As the days drag on, this figure aggregates to become debt, eventually reaching $1200 after an entire year of irresponsible pea consumption. So despite following those very helpful instructions from his commander-in-chief and increasing his fiber intake, the Captain now finds himself in a precarious fiscal situation. The circumstances are the same for the United States, except in this case the wasabi peas are a decade of costly warfare, tax cuts for people who don’t need tax cuts, one global financial meltdown and a questionably effective stimulus program, among other things.
At the time of this writing, our debt is hovering around 14.5 trillion dollars, which is the same as 6.44 trillion New York City subway rides or the amount of times Lindsay Lohan has face-planted in West Hollywood. Since our spending continues to spiral out of control, Congress will need to vote by August 2 to raise our borrowing capacity, which is something they have been required to do since passing the Second Liberty Bond Act in 1917. Why August 2? Because this is the date, according to Treasury Secretary Geithner, on which the United States will no longer be able to pay its bills with our current capital reserves. So to sum up, “the greatest country on Earth” has maxed out its national credit card, and it’s finally time to pay the piper. I almost said “pea-per,” by the way. Who can resist a good pun?!
Anyway, this is a predicament that looks bad from pretty much every angle. Borrowing even more money that we don’t have is probably not a wise decision at this point, and yet if we don’t raise the debt limit a lot of really terrible things stand to occur, such as the suspension or termination of important social programs and an increase in the likelihood that foreign investors will begin to doubt America’s creditworthiness. Of course only time will reveal the outcome, but since we will ultimately have to take the reins of this rapidly disintegrating nation, I thought this issue was one that should at least appear on our collective radar. As we struggle to establish ourselves in one of the most challenging financial climates in recent history, our so-called leaders are engaged in a dangerous game of political chicken that just happens to hold our futures in the balance. Will you trust them to do the right thing?