The Bankrupting of America
What happens when you spend money you don’t have? Everyone knows the answer to that question. But what happens when the government does it on an unprecedented scale? Sooner or later, all debts have to be repaid. The question is, who’s going to foot the bill? Economist Stephen Moore has the answer.
INT. HOSPITAL ROOM – DAY
Sitting up in bed, Mom holds her precious new baby in her arms. Alongside her, Dad beams with pride. In the background, a doctor smiles. So does the nurse, dressed in her scrubs.
GOVT DEBT COLLECTOR (VO)
I’m here to collect your $600,000 share of the national debt!
The Government Debt Collector, clad in a black suit, stands in the doorway
Mom turns white with horror.
“What! We don’t have $600,000!
GOVT DEBT COLLECTOR
I wasn’t talking to you. I was talking to your baby.
He reaches over and tags the baby’s tiny little toe with $600,000 IOU.
GOVT DEBT COLLECTOR
Have a nice life.
Open mouthed, Mom, Dad, Nurse, Doctor and finally Baby watch him exit.
INT. Maternity Ward
See the baby with a toe tag.
This isn’t a made-up horror story. It’s real. It is the unpaid credit card bill our kids and our grandkids are facing—money they didn’t spend but will have to pay.
The Democrats point their finger at the Republicans. The Republicans point back at the Democrats. The truth is that the politicians of both parties have brought us to the edge of this financial cliff.
They say they’re spending all this money with the best of intentions: the trillions are needed to end hunger and reduce inequality; provide everyone with free health care; and save the planet from global warming.
But there is no way around the simple math. You can’t spend what you don’t have—not indefinitely. Debts have to be repaid.
We’ve been sweeping this problem under the proverbial rug for decades, but now we’re running out of rug.
During the year of the Covid crisis, a Republican president, Donald Trump, approved a massive increase in government spending. His reasoning went like this: We shut down the economy. We have to help people out.
Did he go too far? Maybe, but just about everyone agreed something had to be done.
Then, Joe Biden, a Democrat president, entered the White House and called for $1.9 trillion in additional spending—even though one trillion of the previous Covid relief money had not yet been spent, and even though the economy was already well on the way to recovering.
Then the new President quickly asked for another $1.1 trillion for “infrastructure”, which used to mean projects like roads, bridges, and airports, but now includes giveaways like electric car charging stations for Tesla owners. By the way, 19 Republican Senators joined the Democrats. Nobody is blameless.
But, wait—that only turned out to be President Biden's opening bid. He put another $3.5 trillion in spending on the table for a whole slew of goodies: free child-care, free community college, student loan forgiveness, expanded Medicare and Medicaid, vast subsidies for “green” technology, and on and on.
Add all this extra spending and you arrive at $6 trillion dollars. Yes, that’s a six with 12 zeroes after it.
This is a level of spending we have never seen before.
The numbers are so big, it’s impossible to grasp. But to offer a little perspective consider this.
$6 trillion is more money (adjusted for inflation) than we spent on the Revolutionary War, the Civil War, World War I, World War II, the Louisiana Purchase, the Transcontinental Railroad, the Interstate highway system, and the Moon Landing combined.
Normally, we borrow money as a nation during a period of crisis. Then, when the crisis ends, we start to pay down the debt.
What the Progressive Left wants to do is launch the biggest spending spree in American history—after the crisis is over!
What’s looming ahead, however, is a new crisis: a nuclear-sized debt bomb. Our multi-trillion dollar national debt was bad enough before all this proposed spending.
But, progressive politicians and some economists tell us we have nothing to worry about. All we need to do is tax the rich! But there aren’t enough millionaires and billionaires to pay this kind of bill. Or they say, as long as China keeps buying up our debt we're fine. We can spend all we want.
But do we really want to be in debt to the Chinese for trillions of dollars? They aren't exactly our best friend.
And what if there is so much debt, the Chinese and other nations can’t buy all of it, even if they wanted to.
You know what happens then?
The US government is forced to buy its own debt. This just means we print money to pay our bills. If your common sense tells you that’s crazy, that’s because it is.
If printing money could make a nation rich, then Argentina, Venezuela, and Zimbabwe would be among the richest nations in the world.
You don’t have to be an economist to know that printing money is the perfect recipe for serious inflation.
And inflation is a prosperity killer. It shrinks what you can buy with your paycheck, and it eats away at your savings.
In the 1970s prices rose so fast that the economy crashed and unemployment soared. Things were so bad economists created a misery index: inflation plus unemployment, and that hit 20%.
And today, prices for everything, from gas to food, are on the rise again.
Once inflation gets going, it’s hard to stop.
Runaway inflation leads to financial ruin.
This is what happened after World War I in Germany, for example. The debts were so high and the currency so debased that women had to bring wheel barrels full of bills to the grocery store to pay for food.
And we know where that led.
If that’s not the future we want for our kids, we need to stop the wild spending and defuse the debt bomb.
The sooner, the better.
I'm Stephen Moore, economist at FreedomWorks, for Prager University.