Thank You Grandpa: The Consequences of Fiscal Irresponsibility
Glenn Swift
December 07, 2007
“I place economy among the first and most important of republic virtues, and public debt as the greatest of the dangers to be feared." (Thomas Jefferson to William Plumer in 1816).
Throughout most of our history, fiscal responsibility was far more than a political catch phrase – it was a way of life. Confident that they were building a better country and a brighter future for their children and grandchildren, generations of Americans worked hard, saved what they could, and tried not to live beyond their means. It was a simple philosophy, and it worked. Worked so well in fact, even the government played by the same rules.
That was a long time ago.
Today, the American way of life can be summed up as follows: BUY NOW, PAY LATER. Let’s look at a few facts. Seventy-five years ago, our national debt stood at $16 billion, or about one-sixth of our Gross Domestic Product (the total value of goods and services sold in a twelve-month period). These days the national debt stands at just over $9 TRILLION DOLLARS, and is nearly two-thirds of GDP. Got your attention? Perhaps it’s a bit “fuzzy” to speak in these terms. After all, how many of us deal in trillions? OK then. Here’s the scoop in plain English. The average citizen’s share of this monster debt (we’re talking every man, woman, can child here) is now $30,000!
Who is going to end up paying this debt? Not us...
Nope... not us. Who then? Our children and grandchildren, that’s who. Yes, that’s the coldhearted truth. Our legacy is that we are passing on the burden of a crippling and growing debt to future generations – a far cry from what was given most of us by “the greatest generation.” The implications of our utter negligence in getting our economic house in order are profound. The rising debt threatens our nation's long-term economic security; as deficits climb, we are borrowing more and more money from Japan, China, and a host of other nations – not all of whom are exactly “friends.” This makes us weaker, not stronger. Bottom line -- we need to stop piling up money we owe to foreigners and start facing up to our nation's dramatically growing dependence upon debt.
Sadly, what many of our “leaders” fail to recognize is that the insatiable level of current federal borrowing is a moral problem: we are passing an increasing part of the cost of current government services to our children WITHOUT THEIR CONSENT. Ironically, many of those at the top who are responsible for this egregious situation fail to see the potential peril of their fiscal irresponsibility. In fact, some are even convinced that the federal government’s voracious borrowing serves the public good.
Reagan proved deficits don't matter,” Dick Cheney told Secretary of the Treasury, Paul O'Neill, during a Cabinet meeting some five years ago. “We won the 2002 midterms. This is our due.” (Ron Suskind, The Price of Loyalty: George W. Bush, the White House, and the Education of Paul O’Neill, 2004)
So there you have it, right from the mouth of the Vice President of the United States – DEFICITS DON’T MATTER. Cheney's remarks bring this question to mind: what kind of a government do we have? Incredibly, the VP believes it is the Bush administration's “due” to run deficits and leave the bills for future taxpayers. Startling. Yes, many governments run deficits, but this might be the first that believes it is RIGHT in doing so. And the political lesson that Cheney drew from the Reagan years? There is no political cost to big deficits. (Of course, there was a risk involved with the Treasury Secretary disagreeing with the Vice President. A month after the before mentioned meeting, Cheney called O'Neill to suggest he announce his wish to retire. “I'm too old to begin telling lies now,” said O'Neill. Result: Cheney fired him.)
These are big revelations. Then again, the notion that “deficits don't matter” can be defended politically only as long as voters agree. In polls prior to the 2002 midterms, voters worried about Bush's deficit said they would rather have a tax increase than a tax cut – then voted Republican. For Cheney and Rove, that was proof that deficits don't matter.
Even politically, that's a game that lasts only so long. Usually, governments don't like the idea of passing the bill to their children any more than individuals do. Yes, they will accept deficits to stimulate the economy (when needed), but the idea that they "don't matter" or are government's "due" is a strange one.
This leads us to another point. What if today's children grew up and REPUDIATED their parents’ debts? You heard me right! Suppose they simply walked away from the bills accrued via government deficits (not to mention all those credit cards). Imagine if they simply refused to carry the burden of underfunded pensions and the U.S. Social Security system. It wouldn't have to happen directly, like a blatant default on U.S. Treasury bonds. They could do it far more subtly, by policies that inflated the currency and subsequently devalued their “commitments.” Not a chance you say? How do you know! Our nation might be looking down the road at a level of open political warfare between the generations that would make today's “culture wars” look tame.
These are not the extremist hallucinations of a fevered “gold bug.” Our nation is living dangerously beyond its means, and the consequences are uncertain at best. The point here is that none of us should be allowed to unilaterally impose a debt on an unwilling third party. Our generation has allowed a federal “credit card” to be used in a run-away manner, to avoid paying for the social spending excesses we allowed government to make -- and we intend to leave the credit card bill to our children and grandchildren to pay off, thus lowering their future living standards to what they could and should be.
Do our children and grandchildren DESERVE to inherit an economy loaded with debt? The decision is yours.
Throughout most of our history, fiscal responsibility was far more than a political catch phrase – it was a way of life. Confident that they were building a better country and a brighter future for their children and grandchildren, generations of Americans worked hard, saved what they could, and tried not to live beyond their means. It was a simple philosophy, and it worked. Worked so well in fact, even the government played by the same rules.
That was a long time ago.
Today, the American way of life can be summed up as follows: BUY NOW, PAY LATER. Let’s look at a few facts. Seventy-five years ago, our national debt stood at $16 billion, or about one-sixth of our Gross Domestic Product (the total value of goods and services sold in a twelve-month period). These days the national debt stands at just over $9 TRILLION DOLLARS, and is nearly two-thirds of GDP. Got your attention? Perhaps it’s a bit “fuzzy” to speak in these terms. After all, how many of us deal in trillions? OK then. Here’s the scoop in plain English. The average citizen’s share of this monster debt (we’re talking every man, woman, can child here) is now $30,000!
Who is going to end up paying this debt? Not us...
Nope... not us. Who then? Our children and grandchildren, that’s who. Yes, that’s the coldhearted truth. Our legacy is that we are passing on the burden of a crippling and growing debt to future generations – a far cry from what was given most of us by “the greatest generation.” The implications of our utter negligence in getting our economic house in order are profound. The rising debt threatens our nation's long-term economic security; as deficits climb, we are borrowing more and more money from Japan, China, and a host of other nations – not all of whom are exactly “friends.” This makes us weaker, not stronger. Bottom line -- we need to stop piling up money we owe to foreigners and start facing up to our nation's dramatically growing dependence upon debt.
Sadly, what many of our “leaders” fail to recognize is that the insatiable level of current federal borrowing is a moral problem: we are passing an increasing part of the cost of current government services to our children WITHOUT THEIR CONSENT. Ironically, many of those at the top who are responsible for this egregious situation fail to see the potential peril of their fiscal irresponsibility. In fact, some are even convinced that the federal government’s voracious borrowing serves the public good.
Reagan proved deficits don't matter,” Dick Cheney told Secretary of the Treasury, Paul O'Neill, during a Cabinet meeting some five years ago. “We won the 2002 midterms. This is our due.” (Ron Suskind, The Price of Loyalty: George W. Bush, the White House, and the Education of Paul O’Neill, 2004)
So there you have it, right from the mouth of the Vice President of the United States – DEFICITS DON’T MATTER. Cheney's remarks bring this question to mind: what kind of a government do we have? Incredibly, the VP believes it is the Bush administration's “due” to run deficits and leave the bills for future taxpayers. Startling. Yes, many governments run deficits, but this might be the first that believes it is RIGHT in doing so. And the political lesson that Cheney drew from the Reagan years? There is no political cost to big deficits. (Of course, there was a risk involved with the Treasury Secretary disagreeing with the Vice President. A month after the before mentioned meeting, Cheney called O'Neill to suggest he announce his wish to retire. “I'm too old to begin telling lies now,” said O'Neill. Result: Cheney fired him.)
These are big revelations. Then again, the notion that “deficits don't matter” can be defended politically only as long as voters agree. In polls prior to the 2002 midterms, voters worried about Bush's deficit said they would rather have a tax increase than a tax cut – then voted Republican. For Cheney and Rove, that was proof that deficits don't matter.
Even politically, that's a game that lasts only so long. Usually, governments don't like the idea of passing the bill to their children any more than individuals do. Yes, they will accept deficits to stimulate the economy (when needed), but the idea that they "don't matter" or are government's "due" is a strange one.
This leads us to another point. What if today's children grew up and REPUDIATED their parents’ debts? You heard me right! Suppose they simply walked away from the bills accrued via government deficits (not to mention all those credit cards). Imagine if they simply refused to carry the burden of underfunded pensions and the U.S. Social Security system. It wouldn't have to happen directly, like a blatant default on U.S. Treasury bonds. They could do it far more subtly, by policies that inflated the currency and subsequently devalued their “commitments.” Not a chance you say? How do you know! Our nation might be looking down the road at a level of open political warfare between the generations that would make today's “culture wars” look tame.
These are not the extremist hallucinations of a fevered “gold bug.” Our nation is living dangerously beyond its means, and the consequences are uncertain at best. The point here is that none of us should be allowed to unilaterally impose a debt on an unwilling third party. Our generation has allowed a federal “credit card” to be used in a run-away manner, to avoid paying for the social spending excesses we allowed government to make -- and we intend to leave the credit card bill to our children and grandchildren to pay off, thus lowering their future living standards to what they could and should be.
Do our children and grandchildren DESERVE to inherit an economy loaded with debt? The decision is yours.
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