I read an op-ed piece in the Washington Post today. Okay, I'll fess up: I didn't actually read it in the Washington Post, though that did make me sound rather intellectual, didn't it? Can't you just see me in my robe with pipe and slippers, perusing the Post? What actually happened was, I first read about the op-ed on my phone, via the mobile site of the Chicago Tribune. The story interested me enough to read the online version when I got to work on WashingtonPost.com. There, I've come clean about my heathen ways.
Now that that's settled, on to the op-ed piece in question. It was written by Sheila Barr, who is the chairman of the Federal Deposit Insurance Corporation, better known to all of us as the FDIC. In it she discusses her fears about the financial future of the United States, given the massive amount of debt our government is currently saddled with, debt that continues to grow every day.
This topic gets my dander up a few times a year. To me, there is scarcely anything more ridiculous than the way the government operates financially. We're currently in debt to the tune of something on the order of $14 trillion. To put it in perhaps more understandable terms, because how many of us can really conceptualize of how big of a number that really is, that's fourteen million million. If I had $14 trillion, I could give everyone here in Eastern Iowa, plus the entire Chicagoland area (because I'm feeling generous) a million dollars and I'd still have something along the lines of $3 trillion left for myself (which seems only fair.) There is no other way to put it, really; it's a sickening amount of money.
So we're all up to our ears in debt, and that's just the government debt. Start adding in how far in arrears many of us are on a personal level, and it gets truly frightening. All of us, even those of us who have zero personal debt, owe someone (or many someones) a whole bunch of money.
This is not to say that debt is inherently bad. Indeed, there are many ways in which debt is good. I hear a radio ad (not on this station, mind you, and remember, I listen to the other stations so you don't have to) from time to time that says “mortgages should be illegal.” Its premise is that because you have to pay interest you end up paying a lot more for your house than the purchase price. Well, no kidding. Unless you have tens or hundreds of thousands of dollars in your pocket, you can't exactly pay cash for that house now can you? The only real option is to borrow the money, which of course costs money. You do however end up with an asset that has value (presuming you take care of the place), so I would argue that this kind of debt is good, and that that radio ad is full of crap. If you need to pay cash for your housing, we're all going to live in cardboard boxes. Of course, we might all end up doing that anyway if we don't fix the money mess we're in.
The kind of debt that is not good is for those kinds of things which don't end up with a corresponding asset. Paying for dinner with a credit card is fine, if you pay the bill without incurring interest charges. But repeatedly paying for dinner on your credit card with no ability to actually pay off the debt is a really bad idea. This is what we've done for years and years and years in America, both on a personal level and a governmental level. We just throw money at something that is gone in a flash.
I won't pretend that I understand where all of the money the government spends is going, and there are certainly some absolutely necessary things we as a society invest in. I can say with confidence, however, that we are throwing a ton (many many tons, I'm sure, if we just weighed the dollar bills) of money away on things we have no business spending money on. Well, let me amend that briefly: We could spend our money on whatever frivolities we'd like, provided we actually had the money. Problem is, we don't, and we won't, at least not anytime soon. We cannot afford many of the things we are spending our collective money on.
The other problem is, we send a bunch of jerks off to Washington to represent us who are egomaniacal ass-bonnets. What is better at feeding one's ego: Spending (someone else's) money, or saving money? Spending, of course. Let's face it, saving money is no fun, but we need to wake up to the fact that it is a means to an end, the end being financial security. It's no different at home. Is it more fun to watch an $800 flat-screen TV or to save that $800? Saving is boring. It's also just happens to be necessary.
Just as massive personal debt threatens an individual's way of life (think Vinny coming to bust your kneecaps if you owe him too much money, or losing your home because you can't repay the bank the money they lent you), massive government debt threatens our very democracy. What is our recourse when we have a democracy so out of control that is incapable of managing our finances? We have election after election, and nothing ever really changes (or if it does, it doesn't last long.) If it gets so bad that we riot in the streets and manage to topple those in power without an election, the only likely result is some form of dictatorship. I don't think we really want that, but it may become necessary and/or inevitable if we don't get our financial house in order.
We need to get out of debt, or at least get it down to a manageable level, one where our indebtedness is financing long-term projects that will deliver a high return on investment. How does one get out of debt? It's a very tricky process called spending less than one takes in. According to the Tax Policy Center, the US Government took in about $2.5 trillion in tax revenue in 2008. That's a lot less than the $14 trillion we're in debt, so we've got our work cut out for us. Even if we cut government spending to a level $500 billion less than we take in each year (and insiders would call that draconian--I call it a good start) it will take us 28 years to pay off that debt.
I think it's time to do that. I don't care how much it hurts, and it might, for a while. We have done the equivalent of partying our way into this position, and it's time we make the hard choices, to man-up as it were, and rebuild our society on a sustainable foundation. One could say we've taken a 30-year mortgage out on the American Dream, and now we have to pay it back. If we get going (an' my figgers are right) we'll pay our 30-year mortgage off two years early, in (gulp) 2039. Let's get cracking on this. I really do believe this nightmare situation we find ourselves in presents us with an incredible opportunity to recreate our society in a way more in line with the way it was meant to be, heavy on personal responsibility and “we're in this together” spirit, light on people sucking off the government teat.
Much will need to change, and quickly.