Friday, November 25, 2005

About the National Debt

On October 18th the national debt passed another milestone as it transgressed $8 trillion dollars, but equally important is the rate at which it is increasing. It took six years for the national debt to increase from $5 to $6 trillion dollars, two years to grow from $6 to $7 trillion, and a single year to top the newest threshold of $8,000,000,000,000.

Just as “we the people…” must pay monthly interest and principal payments on our personal or family debt, our government must do nearly the same – it makes monthly interest payments only. The payments currently amount to $26 billion per month, do not reduce the debt at all, and represent the third largest item in the federal budget.

The payments are classified as a non-discretionary budget item because there is no discretion (option) as to whether to make the payments or not – they must be made, and made prior to any other item including national defense. Since we are not buying down the debt, it will remain for our children and our children’s children. They will have to continue making interest payments on the debt their parents created while trying to develop a plan to reduce the principal at the same time. There will be precious little discretion for them to fund important needs, issues and emergencies, natural or man-made that will undoubtedly surface in the years to come.

What is most shocking is that Communist China owns $448 billion dollars of that debt load and it is growing at a rate of 15% per year. Even though we won the Cold War against the Communists in the early 1990’s, our elected officials have been selling our soul back to them in order to finance their uncontrolled spending habits in order to ingratiate voters and secure their re-election.

Both the House and the Senate have heard the message that “we the people …” are concerned about the uncontrolled spending and the ever increasing national debt. In response, the Senate has extolled their virtues by voting for a ">$35 billion dollar reduction in the federal budget, while the House has passed a $50 billion dollar curtailment. Now they have to negotiate on one of the numbers or something in between the two.

Americans must understand that neither group has done anything worthy of boasting. In real numbers they have accomplished nothing. The proposed reductions are spread over a five year period; consequently, the yearly reduction is in the range of $7 to $10 billion. As impressive as that number may seem, it is insignificant when compared to the overall national federal budget of $2.5 trillion or $2,500 billion dollars. Suddenly $7 to $10 billion out of $2,500 billion is not quite such an accomplishment.

In personal terms, which are always easier to wrap our minds around, the numbers become truly unimpressive. For a family with a $50,000 annual income, a budget reduction of $140 to $200 per year is an equivalent accomplishment. That is a less than $20 per month – one trip for a family of four to a fast food restaurant.

It should be obvious that in spite of their feelings of success, our representatives have not adequately addressed the out of control federal budget as it increases the national debt. Either they have lost touch with the value of money or they have attempted to overly impress all Americans with a purely ceremonial exercise in futility. In reality, they have done nothing of substance to achieve the goal of a balance budget, not to speak of an actual reduction in the debt legacy we will leave for future generations.

“We the people …” must require our elected officials, the managers of our government, to make real and significant reductions in both the federal budget and the national debt. It will require a great deal of pressure on our part, and many tough decisions on theirs. Maybe they should begin by re-reading the United States Constitution to regain our fore-fathers plans as to the role and responsibilities of a central government.

William G. Pierce

11/29 Update: Added links to the fifth paragraph.

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