BETWEEN THE LINES: A stay of execution
The secret of being a good magician is to excel in the art of diversion by getting the audience to focus on the wrong place.
Wait a minute! I meant to write politician.
The charade being played by the elected leaders of both parties on the current extension of the debt ceiling, and the so-called budget cuts they intend to make, is not exactly what the doctor ordered.
Only on Capitol Hill can a decrease in future spending increases be considered a spending cut. No plan presented by either party offered a real net decrease in future spending. Putting rhetoric and subsequent threats aside, let us examine the facts.
First of all, there never was a risk of default as the federal government has sufficient revenue to pay off the bond holders first.
Historically speaking, the public and private debt increased 50 percent from 1960-1980, a period which included the Vietnam War.
From 1980-2000 it expanded sixfold, principally because of rising optimism from a prosperous economy in which many believed the sky was the limit.
It reached its zenith in the first quarter of 2009 as overall debt rose to $52.9 trillion.
Since 2007, corporate debt has remained fairly constant, while household debt fell as consumers became more cautious because of a stagnant economy and high unemployment. Government spending in excess of revenues filled the gap aided by an accommodating Federal Reserve.
To illustrate, in 2005, the government sector’s share of the debt was 16 percent. The federal share of the debt now stands at 23 percent. Just since 2008, $4.1 trillion has been added to the deficit, raising it to $14.3 trillion.
Simply stated, it is taking $525 billion in additional debt to maintain the appearance of recovery. A telling statistic is unemployment continues to remain more than 9 percent in spite of the creative accounting practices of the Bureau of Labor Statistics, which fails to consider those out of work for a long time as being unemployed.
The original purpose of the debt ceiling was to place a limit on government spending, not just an arbitrary target. That Congress has passed 69 measures to alter it since March 1962 is a compelling statistic, proving beyond a shadow of doubt it is a worthless practice. There is very little consolation to take from the fact that this time around the debt ceiling debate was more highly contested.
The end result still added another $2.4 trillion to the total.
It is human nature to want to avoid the consequences of our mistakes, even economic ones. The problem is the real solution requires politicians to make unpleasant decisions, which are offensive to their respective constituencies and special-interest groups, thus making it difficult for them to get re-elected.
Now is not the time to breathe a sigh of relief since the imminent crisis has been averted.
Unfortunately, the problem is we are no closer to solving our spending spree. We have merely been granted a stay of execution. In the interim, the federal debt will continue to accrue so when the inevitable collapse occurs, it will have a far greater impact.
Life teaches us the sooner we tell the truth the better off we are. The longer we delay, the more uncertain the consequences become. Do you really trust career politicians to do what is in the best interest of the republic?
Laughlin is a Christian Libertarian. He is an economist, teacher, father, husband and most recently a grandfather. He has written a weekly column for The Tribune for 12 years. He and his wife Gina reside in Meadowlakes. To contact him, email ablaughlin@nctv.com. He is an independent columnist, not a staff member, and his views do not necessarily reflect those of The Tribune or its parent company.