Tuesday, August 2, 2011

National Debt Stuff

Now that the U.S. has averted default by being able to raise the debt ceiling, some in Congress have taken to cite this "groundbreaking" moment in time.  I give you, Rep. Henry Cuellar:
“While raising the debt ceiling is not uncommon, the accompanying spending cuts are groundbreaking. As a Member of the Blue Dog Coalition and as true fiscal conservative, I believe it is critically important to ensure that we reign in government spending and seek to balance our budget in the best interest for the American people. This deal includes deficit reductions to both domestic and defense spending and would total nearly $2.1 trillion dollars over the next 10 years. It will not undermine critical investments, such as Pell Grants by funding them through 2015, so that our students can be globally competitive in the workforce. We are coupling an increase in the debt ceiling and real reform to future spending – this is a historic stride for our nation toward solidifying a fiscally conservative era of government.”
So this new deal enables the United States to spend, on a yearly basis, exactly what it takes in in revenue.  That sounds good and all because we won't have to borrow more money to cover our expenses.  But when you have a $14 trillion debt, the yearly interest on that note alone should make this "groundbreaking" stride worthless.  

This whole debt ceiling conversation has been idiotic.  Just take for instance the fact that Henry Cuellar revels in calling himself a fiscal conservative but touts the area's unmanned aerial vehicles as a necessary tool in border security.  At some point you have to consider when an object becomes a luxury.  He might not consider it as such, but he would probably learn a thing or two about what it really means to be fiscally conservative by seeing how some north Texans govern.

In the end the debt ceiling issue came down to budget cuts with no revenue increases, just as those on the right wanted.  That's not compromise (bipartisanship) by any means.  The Bush tax cuts are set to expire next year, but what guarantee will we have that that particular issue won't be held hostage in order to appease the republicans.

Those who drove the issue against raising taxes simply saw cuts as the cure-all; and they pointed to personal experience to justify their logic.  But how much sense does that make when you really look at the figures?  If we were seriously going to compare what we do in our daily lives with what the government has on its hands, I don't know that it would all work itself out.

If we racked up as much debt as compared to our revenue as the government has done, we would most likely default on our obligations.  But if we wanted to really preserve our financial standing, we would cut spending, and we would sell off assets, and we seek new revenue streams to bring down the debt, and be more financially responsible.  I don't expect any administration to pay off a $14 trillion debt, but at some point we have to start making a dent.  Currently the federal government takes in a little more than $2 trillion a year.  That translates to an approximate debt ratio of 7.  Calculate your debt ratio by multiplying your yearly salary times seven.  And then tell me if you wouldn't take another job to pay down your debt.

The cuts that are coming our way won't have everybody's best interest in mind.  Some will sacrifice while others won't. 

 




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