Debt We Cannot Afford to Pay

My family's household budget is probably not that much different than yours. Money comes in, money goes out. And at the end of the day, the budget equation is simple: revenue (-) expenses = money left over to do...well...whatever. Basic math. It's not rocket science.

We have our bills to pay: the mortgage, a car payment, food, utilities, and so forth. The expenses get paid. We are able to save for retirement, the kids' education, and put money away for a rainy day. Things are in good order with our household CFO managing the books - and she's a good looking CFO if I do say so myself. But, there's one bill that bugs me to no end. The credit card [insert Darth Vader's theme here]. Not entirely useless, but pretty darn close. It is the evil of convenience.

So as I was recently perusing articles and analyses about our nation's debt, it hit me. The feds have the ultimate Visa Platinum card. Run it up, raise the debt ceiling, then run it up some more. A very unhealthy fiscal policy - whether it's Jane Schmoe down the street or Uncle Sam on the banks of the Potomac. Fortunately Jane doesn't come looking for a hand out to make her minimum payment, but that distant uncle does.

Our national debt stands at $12.153 trillion. That's $39,513 for every person in America. So why is that a big deal? After all, since Americans buy that debt in the form of savings bonds, Treasury bonds and T-bills, don't we owe the money to ourselves? Consider this...foreign interests own 49% of our outstanding Treasuries and T-bill dominated debt - so I'd say its a pretty big deal. Being in hock and reliant on other nations to fund our government's "activities" doesn't put us in a very good position, geopolitically speaking.

I wonder if this is what Alexander Hamilton had in mind when he argued for the creation of national debt back in 1790. Do you think that $12.153 trillion meets his expectation of a "reasonable debt" that is the "...powerful cement of our union."? I would suppose not. I even doubt that Hamilton's whiskey tax would help balance the budget now, even with Kid Rock pimping his own line of Kentucky windage to the masses.

So what do you suppose is scarier? The total amount we owe or the fact we may actually be unable to pay the interest on the 500 pound gorilla clinging to our back? There are some projections that show the interest on our debt to exceed $500 billion in the near future - if interest rates remain low. But if interest rates go up...as they must...we've got a big problem on our hands. Think "adjustable rate mortgage" on steroids. You've certainly heard of the "too big to fail" theory as it applies to our commercial financial institutions, just imagine if the Federal Reserve Bank fell into that category? Who would bail them out?

At the end of the day, it really does come down to that basic equation: revenue (-) expenses = money left over to do...well...whatever. With 2010's budget deficit over $1 trillion, I don't think the uber smart guys on Pennsylvania Avenue understand the equation. Perhaps a night school class is in order to help clear things up a bit. After all, we can't rely on the evil of convenience any longer.

So where do we draw the line? Our main entitlement programs are basically off the table. As is defense spending. Those won't ever be touched - our pols don't have the nerve. But can we really afford another $1 trillion a year in medical "reform?" Do we still need the Department of Housing and Urban Development? What about the Department of Labor or the Department of the Interior? Did you know we had a National Ice Center? Its not that our government's organizations don't provide meaningful services - but can they be reorganized, trimmed, leaned-up a bit? Are there some hidden overlapping of responsibilities or outdated organizations that can be excised like that pesky mole on your chin?

And that, my friends, is the problem. That pesky mole on Uncle Sam's chin is the size of a bowling ball. No one has the nerve to follow through or even suggest that he goes to his doctor to have it removed or at least shaved off a bit. Every government department, office, administration, or agency is a sacred cow. Moo.

In my house, when things get tight we quit spending money. Plain and simple. You probably do the same thing. When things aren't tight, we're constantly on the lookout for ways to spend less, cut back, or reduce the outflow. That's how it works in the real world. Perhaps the crew in D.C. need a new CFO - one that's much better looking than Nancy Pelosi, Harry Reid, and Pete Orszag. But unfortunately for our great nation, my wife won't move there.